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Biotechnology 
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Pages 8-10 and Pages 25-28 



FINANCIAL TIMES 


'Eu^po :, -3K0u'5i nesS -r\J ev/so ar/ar ■ 


North Yemen units 
drive on Aden in 
bid to restore unity 

South Yemeni forces were yesterday fighting 
to repulse northern units attempting a drive 
towards Aden, the political and economic capital 
of the south, where Ali al-Beidh, vice president 
of unified Yemen and political leader of the region, 
is fighting for his political life. Ali Abdullah Saleh, 
unified Yemen's president and leader of the north, 
is seeking to evict him from power and reassert 
the country's disintegrating four-year-old unity. 
Pages 

Investment trusts eye US market: 

Representatives of the UK investment trust indus- 
try arrive in the US today to press for permission 
to sell investment trust shares to US investors. 

Page 6 

Japanese minister resigns: Japan's 
controversial justice minister, Shigeto Nagano, 
resigned over the weekend, just 10 days after 
taking office, after claiming that the massacre 
of more than 150,000 people in the former Chinese 
capital of Nanking in 1837 never happened. Page 2 

Mannesman swings Into loss: Mannesmann, 
German engineering group whose products range 
from pipes to mobile telephones, reported a net 
loss of DM513m ($300m) last year, a sharp swing 
from a net profit of DM63m in the previous year, 
partly caused by restructuring costs. Page 17 

Multinationals seek investment treaty: 

Europ ean and American multinational companies 
are seeking either a US-EU investment treaty 
or a wider investment pact among members of 
the Organisation for Economic Co-operation and 
Development Page 2 

Traders split from Marc Rich: A team of 
18 ferrous metals traders resigned from Marc 
Rich, Swiss-based international commodities 
trading group, to set up Proffer, a trading company 
which will start operations this week from seven 
offices around the world. Page 17 

EU backs Gulf tariff plans: The European 
Union supports plans by Gulf Arab states gradually 
to unify tariffs, paving the way for a free- trade 
accord, Greek foreign minister Karolos Papoulias 
said. Page 2 

US role crucial In Syrian peace talks: 

Peace talks between Israel end Syria have reached 
a serious new level, but will depend on US media- 
tion, Yossi Beilin, Israeli deputy foreign minister, 
said. Pages 

European Monetary System: The Spanish 
peseta weakened following a week of political 
scandal and the Danish krone strengthened, but 
there was no change in the order of currencies 
in the EMS grid after Germany. France and Bel- 
gium edged rates lower. Currencies, Page 33 


ERRSs Grid 


. ‘Maye, 1894 



Escudo 


The chart shows the member currencies af the 
exchange rale mechanism measured against the 
weakest currency in the system. Most of the curren- 
cies are permitted to fluctuate within 15 per cent 
of agreed central rates against the other members 
of the mechanism. The exceptions are the D-Mark 
and the guilder which move in a 125 per cent band 

Finland and Sweden Join peace alliance: 

Sweden and Finland today move away from their 
long-s tanding neutrality and join the Partnership 
for Peace allian ce devised by Nato. Page 5 

Boost sought for Airbus Jumbo: A&rospatiale 
of France is to press its European Airbus partners 
to step up marketing and development efforts 
of a 500 to 550 seat airliner to challenge the monop- 
oly of the US Boeing company in the jumbo aircraft 
market Page 4 

Serb banker claims UN sanctions beaten: 

Dragoslav Avramovic, governor of the Yugoslav 
National bank, claimed that his economic pro- 
gramme Has alm ost defeated United Nations sanc- 
tions, after he managed to reduce inflation from 
300,000 per cent to zero. Page 4 

Row over EU training funds: The British 
government is refusing to submit plans for spend* 
ing £520m 13759m) of European Union funds avail- 
able to the UK for retraining workers in industries 
undergoing structural change, such as the motor 
industry, saying it should be used for training 
the unemployed. Page 6 

Post office chief fn seB-off talks: Bill 
Cockburn, chief executive of the British Post 
Office, has held talks with investment bank SG 
Warburg about bow best to privatise the corpora- 
tion, although the government has yet to announce 
the results of a review of the Post Office's future. 
Pages 

UK police helped recover painting: Britain's 
Arts and Antiques Squad helped Oslo detectives 
recover Norway's most famous painting, “The 
Scream”, by Edvard Munch, it emerged yesterday. 

Win for Ballesteros: Seve Ballesteros of Spain 
won the £650,000 ($949,000) Benson and Hedges 
open golf c hamp ionship at St Mfellion, England 
three strokes ahead of Britain's Nick Faldo. It 
was Ballesteros's first win for 26 months. 


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MONDAY MAY 9 1994 


Capital investment down 28% ■ Tax revenues fall fast ■ Company debts spiral 

Russia in deep crisis as 
output plunges by 25% 


By John Lloyd in Moscow 

A deep deterioration in the 
Russian economy over the past 
sixth months, with steep falls in 
production, investment and tax 
revenues, risks creating a “social 
explosion", the Ministry of the 
Economy has warned the govern- 
ment 

In the past few days the minis- 
try has released a string of data 
for the first quarter of the year, 
which suggest the economy is in 
the midst of a deep crisis. A 25 
per cent fell in industrial produc- 
tion in the first three months of 
this year compared with 1993, is 
threatening hundreds of thou- 
sands of workers who are being 
laid off with little or no pay. 

The prestigious Z31 industrial 
complex in Moscow, which 
employs 85,000 workers making 
white goods and trucks, has put 
thousands on extended holiday 
and plans to halve truck produc- 
tion to 50,000 this year. Mr Yev- 
geny Brakov, the Zil general 
director, said the company was in 
a “very difficult position". 

According to the nffirini Rus- 
sian Information Agency account 
of the data, the ministry warned 
that a drop in output of con- 
sumer goods “threatens the eco- 
nomic independence of the coun- 
try and brings the danger of a 
social explosion". 

The warning of the looming cri- 


sis was rammed home on Friday 
by Mr 01% Soskoevets. first dep- 
uty prime minister in day-to-day 
charge of the economy. He told 
the official Tass news agency: 
“Russia is living through the 
toughest phase of its transition". 

Moscow is facing a critical 
choice. It could increase credits 
to help out the ailing state sector, 
but that would compromise its 
fight against inflation, which has 
come down to between 8 and 9 
per cent a month from a high last 
year of nearly 30 per cent. That 
reduction has been crucial in 
gaining access to International 


ing!” The indicators of Russia's 
deepening crisis include: 

• The 25 per cent fell in indus- 
trial production in the first quar- 
ter of the year appears to be 
accelerating, according to prelim- 
inary figures for April. 

Production of sugar, shoes, fab- 
ric and clothes has fallen by 
between one third and one half. 
Car, bus and truck production is 
relatively better, standing at 85 
per cent of Last year's level. How- 
ever, some leading car plants 
such as the the AZ1.K (Moskvich) 
factory in Moscow output is 
down by between one and two 


Finland and Sweden join peace alliance 


.Page 5 


Monetary Fund finance. 

However, Russian economists 
warn that if it retains its tight 
monetary stance. It could within 
months trigger a rise in unem- 
ployment to between 10m and 
15m which would threaten Rus- 
sia’s fragile social stability. 

In an effort to alert his compa- 
triots to the looming economic 
threat, Mr Victor Chernomyrdin, 
the prime minister, wrote in the 
weekly magazine "Rossi ya" that 
it was “vitally necessary" to stop 
unwanted production - citing 
tanka as one such sector. 

"Don’t wait!" he exhorted fac- 
tory managers. “Something else 
is coming! Bankruptcy is cam- 


thirds because municipal authori- 
ties have no money to renew 
their fleets. 

• Investment in capital projects, 
including state investment in 
infrastructure, in the first quar- 
ter shrunk to Rbsl2 trillion 
(about $7bn), 28 per cent down on 
1993. The economics ministry 
report on investment says that 
work on the most state and 
regional authorities' investment 
projects has stopped. Foreign 
investment r emains “weak", with 
only 3180m being invested in the 
entire Russian economy in the 
first quarter. 

• Tax revenues are felling fast. 
Government figures show tax col- 


lection short by Rbs3.4 trillion - 
or 15 per cent below budget in 
the first quarter. Regional 
authorities are increasingly 
reluctant to pass collected taxes 
onto the central government, 
according to officials in Moscow. 

• Debts held by enterprises are 
spiralling as customers, other 
enterprises, further up the supply 
production chain, become 
increasingly unable to pay for 
supplies. Many plants will refuse 
orders unless they are paid 
upfront in cash. The economics 
ministry's figures show overall 
corporate debt has risen threefold 
in the last six months, to stand at 
at about Rbs69 trillion. 

• Public support for continued 
reform is collapsing, according to 
a poll taken last week by the 
polling organisation of the Rus- 
sian Academy of Sciences. It 
found support among Russians 
for reforms has shrunk from 
above 40 per cent five years ago 
to under 25 per cent at the end of 
last year. The majority of those 
polled agreed that “privatisation 
is legalised theft” and between 
one third and two third of 
respondents believed that privati- 
sation was “undertaken for the 
benefit of the nomenclatura and 
criminals". 

Enterprises in the coal and oil 
region of Vorkuta have peti- 
tioned for the area to be desig- 
nated one of “special poverty". 



Victor Chernomyrdin: vital to stop unwanted production 


Kemper 
to 

$2.4bn bid 
from GE 

By Richard Waters in New York 

Kemper, the US investment 
group, bowed yesterday to an 
unwanted takeover approach 
from GE Capital after the Gen- 
eral Electric financial services 
arm increased its offer for the 
company to 32.4m. 

GE Capital, which had first 
offered 355 a share for the com- 
pany in March, overcame the 
resistance of Kemper's board by 
raising its bid to $60 a share. 

The agreement, announced 
jointly by the two companies, 
came just three days before 
Kemper shareholders were to due 
to vote on whether to appoint 
four GE Capital nominees to 
their company's board, [f 
approved, this would have put 
irresistible pressure on the Long 
Grove, Illinois-based company to 
agree a sale. 

The agreed deal will turn GE 
Capital into one of the US's big- 
gest fund management groups. 
Kemper, with operations span- 
ning life insurance, mutual funds 
and securities broking, had 
$67.4bn under management at the 
end of March. 

The agreement follows agita- 
tion from Kemper's shareholders 
for a higher offer than the initial 
$55 a share. Although publicly 
putting their weight behind the 
board's rejection of the opening 
GE Capital offer, some of the 
company’s biggest institutional 
shareholders have hinted that 
they would be prepared to con- 
sider a higher bid. 

In an attempt to appease the 
institutions, Mr David Mathis. 
Kemper's chairman, last week 
said the company would poll 
shareholders a year from now on 
whether the company should be 
sold, if its share price had foiled 
to reach $65 in the meantime. 

Yesterday's agreement, though, 
indi cates that this assurance was 
not enough to overcome the 
attraction of an immediate sale. 
Many of Kemper’s shares are 
believed to have passed in recent 
weeks into the hands of arbitra- 
geurs, who buy shares in the 


Continued on Page 16 


‘Chaotic’ bank threatens Africa soft loans 


By Leslie Crawford, 

Africa Correspondent 

Trading member countries of the 
African Development Bank say 
they are holding back the replen- 
ishment of the bank's soft-loan 
fund to demand fundamental 
changes in the way Africa's pre- 
mier lending institution conducts 
Its business. 

AfDB governors say they are 
alarmed at the findings of a task 
force of external consultants who 
recommend a radical shake-up in 
the AfDB's lending policies, pro- 
jects and personnel. 

Their report describes the 
bank, which receives its money 
chiefly from leading western 


Report warns that ‘bureaucratic’ lending institution could destroy itself 


industrial countries, as a chaotic, 
top-heavy bureaucracy, weak- 
ened by the impoverishment of 
the continent it is meant to help, 
and riddled with political 
intrigue and suspicion. 

The report of the Task Force 
on Project Quality, chaired by Mr 
David Knox, a former vice-presi- 
dent of the World Bank, will 
dominate discussions at the 
bank's 30th ann ual general meet- 
ing in Nairobi this week 

"If not strengthened, [the 
AfDB I may end up by destroying 
itself. That is the stark choice 
before the entire Bank commu- 


nity," says the confidential 
report, a copy of which was 
obtained by the Financial Times. 

Ironically, the task force said it 
could not assess the quality of 
the $27.8bn (£19bn) the AfDB has 
approved in loans over the past 
30 years “due to the absence of 
reliable and sufficient data on 
completed and active projects". 

The task force said it could not 
find a central file on any single 
project. The bank's financial 
health has begun to suffer from 
loan defaults and arrears, which 
have topped $700m, according to 
Mr Babacar Ndiaye, the bank’s 


Senegalese president 

"The bank is being pulled In all 
directions," says the report. 
“Management mistrusts the 
board, and vice-versa." 

Almost half of the AfDB's Joans 
have been awarded to seven of 
the bank's 51 borrowing mem- 
bers: Nigeria, Morocco, Egypt, 
Tunisia, Algeria, Ivory Coast and 
Zaire. 

In private, AfDB governors say 
there is open war between Mr 
Ndiaye and some north African 
members of the 18-member execu- 
tive board. The hostility has hin- 
dered policy-making. The task 


force says the president "has 
much authority but no power". It 
says the problems associated 
with the bank's governance must 
be solved. 

The task force says bank per- 
sonnel have been unable to keep 
up with the pace of growth in 
project lending. Little attention is 
paid to the quality of loans as 
opposed to quantity. “The 
absence of responsibility is fertile 

Continued on Page 16 
Leaders gather to see Mandela 
sworn in. Page 2 
Yemenis drive on Aden, Page 3 


Hungary’s former 
communists take 
firm grip in election 


By Nicholas Denton and 
Chrystfca Freeland In Budapest 

Former communists continued 
their comeback in eastern Europe 
yesterday by taking a command- 
ing lead in the first round of 
Hungary's parliamentary elec- 
tions. 

Exit polls gave the Hungarian 
Socialist party (MSZP) 30 per cent 
of the nationwide vote, nearly 
three times their 1990 showing 
when the electorate delivered a 
damning verdict on four decades 
of communist dictatorship. The 
left appeared to be beating the 
ruling rightwing Hungarian Dem- 
ocratic Forum (MDF) into a 
humiliating third place with just 
11 per cent of the vote. Hungar- 
ians, who turned out at the polls 
in record numbers, appeared to 
have lived up to predictions that 
they would punish the govern- 
ment for a 20 per cent decline in 
the country’s GDP since the col- 
lapse of communism. 

Nevertheless, the third force in 
Hungarian politics, the liberal 
Alliance of Free Democrats 
(SZDSZ), enjoyed a surprising 
last-minute surge with exit polls 
giving them 20 per cent of the 
vote. 

Foreign investors and the stock 
market have remained calm in 
the last few days as a Socialist 


CONTENTS 


victory yesterday and in run-off 
elections on May 29 has become 
increasingly likely. The techno- 
cratic Socialists are expected to 
continue or even accelerate eco- 
nomic reform. 

The liberal revival, if borne out 
by official results, would deny 
the Socialists an outright major- 
ity of parliamentary seats and 
force them to Look for partners to 
form a government, though 
Socialist technocrats admit they 
would welcome the liberals' mod- 
erating influence and the oppor- 
tunity to share responsibility for 
painful economic measures. 

Extrapolating from three inde- 
pendent polls yesterday, after the 
second round of voting, the 
Socialists could emerge with 
about 160 of the 386 seats in par- 
liament. around 80 seats would 
go to the Free Democrats and the 
conservative MDF would get only 
50. This sort of an outcome would 
make a Socialist-liberal coalition 
the only feasible government 

The election predictions are 
based on an average, compiled by 
the FT, of exit polls conducted by 
polling organisations Median and 
Szonda-Ipsos. The Szonda-Ipsos 
poll was commissioned by 
the Budapest daily, Magyar Hir- 
lap, 

Ideals of right spurned. Page 4 


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© THE FINANCIAL TIMES LIMITED 1994 No 32,361 Week No 19 


LONDON - PARIS - FRANKFURT - NEW YORK - TOKYO 









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FINANCIAL TIMES MONDAY MAY 9 1994 



EU and US companies concerned about 
threats to national treatment principle 

Multinationals seek 
investment treaty 


By Nancy Dunne 
In Washington 

European and American 
multinational companies, con- 
cerned about discriminatory 
investment policies on both 
sides of the Atlantic, have 
launched a push for either a 
US-EU investment treaty or a 
wider investment pact among 
members of the Organisation 
for Economic Cooperation and 
Development 

“While the rules governing 
trade have advanced, most 
recently in the Uruguay 
Round, the rules on invest- 
ment have not kept pace," said 
Mr Willard Berry, president of 
the European-American Cham- 
ber of Commerce, which is 
W/tirig the ffgmpgign for a new 
international agreement. 
“Practices are emerging every- 
where that denigrate the 
national treatment principle.” 

The principle of national 
treatment, enshrined in numer- 
ous treaties, guarantees that 
governments treat foreign- 
owned companies no less 
favourably than domestic com- 
panies. However, the rise of 
domestic competitiveness con- 
cerns during the last decade 
has spurred the emergence of 
“conditional national invest- 
ment" rules. 

The solution for Mr Berry 
and the 80 European and US 
multinational companies 
which belong to the chamber is 
an international pact which 
would re-commit governments 
to the nntirmai treatment stan- 
dard. In exploratory conversa- 


tions with officials In the US 
and Europe, the proposal has 
been received “wannly”, Mr 
Berry said. 

The chamber's plan is to 
develop a draft “white paper” 
setting forth “issues of concern 
and possible solutions” by the 
end of this month for distribu- 
tion to US trade associations 
and European employers asso- 
ciations. A final paper could be 
completed by June 30, with the 
goal of preparing the way for 
some mention of a new invest- 
ment pact at the meeting of the 
Group of Seven industrial 
country leaders in July. 

“On both sides of the Atlan- 
tic there is a new focus on 
greater business-government 
co-operation to improve indus- 
trial competitiveness,” said Mr 
Berry. "In this new environ- 
ment unconditional national 
treatment for foreign-con- 
trolled firms can no longer be 
taken for granted.” 

In the US, national treatment 
has been the unacknowledged 
focus of a debate which had 
split the administration and 
Congress. At issue was 
whether companies bom and 
headquartered In the US ought 
to be given government sup- 
port unavailable to foreign- 
bom companies although the 

latter may employ tTinmamds 

of US workers. For an adminis- 
tration which has started to 

hand out hnnrimrfa of mifflrms 
of dollars in matching grants 
for research and development, 
the issue of eligibility is cru- 
cial. 

According to Mr Berry, the 


administration has developed 
informal export advocacy 
guidelines which give prefer- 
ence to US-based companies. 
Congress has conditioned 
national treatment for in R&D 
programmes, liberalised anti- 
trust treatment, regulatory 
relief, and participation in spe- 
cial government programmes 
such as the clean car initiative. 

Foreign-based companies can 
be shut out from these pro- 
grammes unless their govern- 
ments extend reciprocal treat- 
ment for US companies, 
protect their intellectual prop- 
erty and open their standard- 
setting processes. The Swiss/ 
Swedish. Asea Brown Boveri, 
for example, has yet to be 
accepted by the Energy Depart- 
ment for participation in a 
project to develop the next gen- 
eration of turbines. 

In Europe, the newly 
strengthened parliament has 
emerged as an advocate for 
reciprocity and domestic pref- 
erences. The controversy over 
Germany’s refusal to apply dis- 
criminatory provisions of the 
EU Utilities Directive - and 
the extent to which it is pre- 
pared to challenge that refusal 
in the European Court of Jus- 
tice - has come to symbolise 
the threat to US companies. 

If the court upholds the EU 
claim that the Treaty of Some 
takpc precedence over the US- 
German fr iendship , commerce 
and navigation treaties, than 
no national treatment commit- 
ments will be available to 
transatlantic business, says the 
chamber. 


EU backs Gulf tariff plans 


The European Union backs 
plans by Gulf Arab states grad- 
ually to unify tariffs, paving 
the way for a free-trade accord, 
the Greek foreign minis ter, Mr 
Karolos Papoulias, said yester- 
day, Reuter reports from 
Riyadh. 

"These positive develop- 
ments undoubtedly lay the 
basis for significant progress 
towards the completion of our 
co-operation framework. . . the 
aim being to conclude a free- 
trade agreement," Mr Papou- 
lias said at the opening session 
of talks in Riyadh between the 
six-nation Gulf Co-operation 
Council (GCC) and the EU. 


Greece holds the EU rotating 
presidency. 

The GCC, which groups 
Saudi Arabia. Oman, United 
Arab Emirates, Kuwait, Bah- 
rain and Qatar, agreed last 
month to unif y tariffs for one 
group of products at. a time as 
a move towards an overall free- 
trade accord. 

Mr papoulias also urged the 
oil-rich states to support envi- 
ronmental protection - appar- 
ently a reference to a European 
plan for new energy taxes to 
reduce fuel usage. 

"The European Union and 
other industrialised countries 
have undertaken commitments 


concerning the protection of 
the environment On the other 
band, our partners in the GCC 
have not,” Mr Papoulias said. 
“We consider this vacuum 
could he filled through contin- 
uous, sincere and constructive 
dialogue” 

GCC states have so far 
objected to proposed EUi. 
energy taxes as d lairimfnattng 
against oil exporters and of 
dubious value in limiting dam- 
age to the environment. 

The economic and political 
talks were attended by GCC 
ministers and officials from 12 
EC countries, including six 
government ministers. 


Japanese minister quits over atrocity claim 


By waiiam Dawkins in Tokyo 

Japan’s co n t ro v e rsial justice minister, 
Mr Shtgeto Nagano, resigned over the 
weekend, just 10 days after taking 
office, after denying that an infamous 
wartime atrocity happened. 

He was replaced by Mr Hiroshi 
Nakai, a centre-right member of the 
lows- house, who immediately tried to 
calm the row by saying tbit it was 
"undeniable'’ that the Japanese army 
“committed cruel acts” in the war. 

Mr Nagano had earlier retracted Ids 


remarks, in which he said that Japan's 
invasions of China - now its second 
largest trade partner - and other Asian 
neighbours were not acts of aggression. 
However, the retraction only partly 
appeased the anger of South Korea and 
was dismissed as inadequate by 
japan’s opposition parties, which plan 
to exploit the blunder to the folL 

Mr Nagano offered his resignation 
after meeting the prime minister, Mr 
Tsutomu Hata, on Saturday. 

Mr Nakai is a member of the Demo- 
cratic Socialist party, a minor partner 


in the five-party government coalition. 
Mr Hata chose him to avert opposition 
criticism that the alliance was domi- 
nated by the right-wing Japan Renewal 
party, which now has seven out of 21 
cabinet seats. Mr Hata heads the JR? 
and Mr Nagano is a member. 

South Korea welcomed Mr Bata’s 
decision, "ft is difficult far both the 
victim and 'the perpetrator to overcome 
the past," said a Smith Korean foreign 
ministry official. Mr Hata’s decision 

showed courage, he said. 

However. Mr Hata’s domestic oppo- 


nents plan to pursue him after he face 
parliament to make Us first policy 
speech tomorrow, when his comments 
on Japan's wartime responsibility wifi 
be closely followed. 

Mr Yohei Kano, president of the Lib. 
eral Democratic party, the biggest 
opposition group, said Mr Hata bon 
“great responsibility" for having 
appointed Mr Nagano. The affair had 
jeopardised the efforts made by fonoer 
LDP governments to improve ties with 
Asian neighbours, said Mr Toshiro 
Mori, its secretary general. 


War wounds still not healed in Tokyo 

Nagano is only the latest to say Japan was really the victim, writes William Dawkins 


N early 50 years after the 
end of the second 
world war, Japan has 
yet to find a stable consensus 
on whether it came through 
that conflict as aggressor or 
victim. 

Just how far Japan’s frag- 
mented political establishment 
remains from coming to terms 
with the country’s wartime' 
record has been vividly illus- 
trated by the events leading up 
to the resignation on Saturday 
of Mr Shigeto Nagano as jus- 
tice minister, a mere 10 days 
after taking office. 

Mr Nagano was asked to 
resign by an angry prime min- 
ister Tsutomu Hata after 
claiming in an interview with 
the Mamtehi S hhnhnn that (me 
of the worst atrocities of the 
Pacific war, the massacre of 
more than 150,000 people in the 
former Chinese capital of 
Nanking in 1937, never hap- 
pened. He also claimed that it 
was not a war of aggression. 

Mr Nagano's claim - with- 
drawn later - angered China, 
South Korea and other impor- 
tant Asian neighbours at a 
jimp when one of the prime 
objectives of Japanese foreign 
policy is to make friends with 
than. It also contradicted suc- 
cessive governments’ officially 
apologetic line over the war, 
pushed harder than ever by 
the former Hosokawa adminis- 
tration and supported by the 
new Hata government 
So it looked, from the 
moment Mr Nagano's words 
were published, that he had 
condemned himself to have 
nn p of the shortest Japanese 
imma terial careers on record. 
He could not have been more 
nut Of Hne with the thfriMng of 
the new reform-minded .pdhti-' 
cal establishment 
Mr Hata, who yesterday 
admitte d partial responsibility 
as the one who appointed Mr 
Nagano, has been weakened by 
running into tins colossal blun- 
der in only the first week of his 
government. 

He opened himself to charges 


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BUILDING PEOPLE - Bl’ILI>I.\« BI'SIXESS 



c • • 

; : 

•• » - • -• •■•*•.; 



New justice minister Hiroshi Nakai (right) is sworn in by Emperor Akthito (left); premier Tsntomo Hata (second left) looks on » 


of equivocation by saying, soon 
after hearing of Mr Nagano's 
statement, that he still wanted 
to work with the justice minis- 
ter and described him as a man 
of balance He was in Brussels 
at the time which may account 
for his cantion over events 
many thousands of miles away. 

Yet the Japanese press is not 
so forgiving. The affair was 
reminiscent of the pre-Hoso- 
kawa tradition of vague apolo- 
gies for the war, later devalued 
by equivocation. 

H The. two faiggest-circulation 
dauy newspapers, the Asa hi 
Shimbun and Yomiuri Shim- 
bun, yesterday criticised Mr 
Hata’s slowness to axe the 
errant minister. The Asahi 
seized on the wider repercus- 
sions, pointing out that Japan 
should shelve its campaign for 
permanent membership of the 
United Nations security coun- 


cil until it has first won its 
neighbours’ ftifi trust 
The Nagano affair shocked 
many people in Japan. But the 
signs are that his remarks 
were no mistake; indeed they 
may have came from the heart 

A s a conservative former 
army chief of staff, the 
71-year-old Mr Nagan- 
o's views were almost as well 
known as those of Mr Shintaro 
Ishihara, a member of the right 
wing of the opposition Liberal 
Democratic party who colour- 
folly complained last year that 
Mr Hosokawa had gone too for 
in his war apologies. So the 
Mainichi probably knew what 
it was doing when it invited Mr 
Nagano to produce his stan- 
dard line on Nanking. 

Neither was he the first cabi- 
net minister to prompt his own 
resignation with such a 


remark. Two others in the past 
eight years have gone the same 
way. 

Mr Seisuke Okuno resigned 
in I9S8 as head of the National 
Land Agency after arguing 
that Japan fought the war to 
secure its own safety. He 
refused to apologise. Before 
him . Mr Masayuki Fiffio was 
almost instantly fired as educa- 
tion minister in 1986 after say- 
ing Japan’s 1910 invasion of 
Korea was justified. 

Mr Nagano created more of a 
domestic fuss than did Mr 
Okuno and Mr Fujio, indicat- 
ing that Japanese public opin- 
ion feels more war responsibil- 
ity now than it did then. 

Yet the affair is a reminder 
that many Japanese still feel 
their country was a victim of 
the war, where the national 
record focuses on the US fire- 
bombing of Tokyo and the 


nuclear destruction of Hiro- 
shima and Nagasaki Visitors 
to Hiroshima, for example, 
report that the local war 
museum carries almost no 
commentary on what caused 
the atom bomb to be dropped. 

School history books remain 
vague on some crucial details 
of the war, despite a series of 
highly publicised court cases 
against nffiHai censorship. 

Japan's international ambi- 
tions will force its public to 
face this rift in the national 
consensus, between the reform- 

niin<W fiatehlighmpnt and foe 

arch -conservatives of the older 
generation. War history will be 
a persistant theme in public 
life as Japan's economic rela- 
tions with its Asian neighbours 
grow closer and as the govern- 
ment lines itself up for the UN 
security council in the next 
few years. 


Panama’s 
voters line 
up for free 
election 

The first of Panama's 1.5m 
voters cast their ballots yester- 
day in tins country’s first folly 
free election in nearly three 
decades, Reuter reports from 
Panama City. 

Thousands of Panamanians 
lined up. some of them for 
more than an hour, at 1,900 
polling stations across the 
country, most of which did not 
open on time. (1200 GMT). 

“We are confident that at the 
end of this day, we will come 
out an top,” presid en tial front- 
runner Ernesto P6rez Balla- 
dares of the Democratic Revo- 
lutionary party (PRD) told 
reporters. 

The most recent polls show 
Mr Pferez Balladares, whose 
party was driven from power 
after the 1989 US invasion, 
went Into the final stretch with 
a 4-9 percentage point lead 
over Caribbean salsa music 
star Ruben Blades. 

Mr P§rez Balia dares 's lead 
heading into the elections 
marks a revival of the PRD, 
which was founded in the 1970s 
by General Omar Torrijos but 
which fell into disrepute under 
the rule of military strongman 
Manuel Noriega. 

Mr Blades, who appeared in 
Robert Redford's movie The 
Mllagro Benefield War, wooed 
voters with lively music and 
the prospect of a dean break 
from Panama's traditional poli- 
tics but his economic platform 
Is less clearly defined. 

As violence has marred Pan- 
ama’s elections for much of its 
history, the government took 
pains to ensure a peaceful vot- 
ing process, banning sales of 
alcohol nationwide from Satur- 
day and mandating strict secu- 
rity at the polling stations. 

Some 8,000 police were 
posted near polling stations, 
while an International tea™ of 
observers headed by former US 
President Jimmy Carter was 
monitoring the process. 

Voters will also choose a 
new 71-member National 
Assembly and 87 mayoralties 
in what appear to he the coon- 
try's freest elections since the 
late 1900$. 


Leaders gather to see; 
Mandela sworn in 


F oreign leaders began 
arriving in South Africa 
yesterday for the inau- 
guration of President Nelson 
Mandela tomorrow in a cere- 
mony due to be televised live 
to millions around the world. 

Mr Mandela, whose African 
National Congress will be for- 
mally installed as majority 
party at the opening of the new 
national assembly this morn- 
ing, stressed over the weekend 
what is likely to become the 
dominant theme of his presi- 
dency, calling for reconcilia- 
tion between all races. 

Meanwhile, outgoing Presi- 
dent F.W. de Klerk continued 
to juggle with his selection of 
candidates far the six cabinet 
posts allocated his defeated 
National party, at the same 
time pursuing efforts to secure 
one of the security portfolios, 
both of which have been 
claimed by the ANC. 

The new government also 
encountered Its first public 
relations setback when it was 
disclosed that Mr Mandela, 
who has been calling for cuts 
in political salaries, will 
receive R575.000 (£107,000) a 
year before allowances, well 
above the rate for most west- 
ern heads of state and consid- 
erably mere than Mr de Klerk's 
current salary of R266.000. The 
figure was fixed by a commit- 
tee established by the outgoing 
government. 

After the parliamentary ses- 
sion. Mr Mandela will travel to 
Pretoria tonight and will be 
formally sworn in as president 

tomorrow morning 

More than 180 world leaders, 
including more than 40 heads 
of state, are arriving in the 
country for the inauguration 
and the overworked organising 
committee is frantically frying 
to ensure adequate security 
precautions and sort out last- 
minute logistical problems for 
the ceremony, which will be 
attended by more than 150,000 
people. Confidence in South 
Africa’s ability to handle an 
exercise of this kind has been 
shaken by the ineptitude 
shown in the organising of the 
elections themselves. 

Speaking to a cheering 


crowd at a Christian thanks- 
giving service led by Arch- 
bishop Desmond Tutu at a sta- 
dium outside Johannesburg 
yesterday, Mr Mandela 
stressed the need for everyone 
to carry through the peaceful 
spirit of the election period 

"It is time for all South Afri- 
cans to remember they are one 
people,” he said 

Haggling over 
cabinet posts 
continues. Our 
Johannesburg 
Staff report 

Yesterday's rally was the 
culmination to a weekend in 
which Mr Mandela addressed 
all the country's main religious 
groupings, attending a syna- 
gogue and mosque in Cape 
Town on Saturday. 

Although the ANC 
announced its list of cabinet 
ministers on Friday, continu- 
ing the pragmatic approach 
displayed by all political lead- 
ers during the election process, 
Mr Man de la suggested over the 
weekend that some reshuffling 
might still occur. The National 
party is known to be particu- 
larly unhappy that both the 
defence and law and order min- 
istries have been allocated to 
ANC officials. 

Under the new constitution 
all parties receiving more than 
5 per cent of the national vote 
are entitled to representation 
in tiie cabinet 

The government will com- 
prise is cabinet ministers from 
the ANC. six from the National 
party and three from Chief 
Mangosuthu Buthelezi’s 
Inkatha Freedom party. 

Neither the NP nor Tnkatha 
has yet announced its cabinet 
choices, but the incumbent 
finance minister, Mr Derek 
Keys, will keep his job, a move 
intended to reassure both the 
international community and 
the local business sector that 
no radical economic policies 
are intended. It is not yet 
known what portfolios will be 


offered to Chief Buthelezi, nor 
whether he himself will accept 
a post 

The new parliament will sit 
for five years during which it 
will serve as legislative assem- 
bly and, in conjunction with 
the senate, draw up a final con- 
stitution. 

Membership of the senate, 
which will have 90 members, 
10 from each region, has not 
yet been finalised. It is expec- 
ted to meet for the first tana 
later in the week. 

Meanwhile, eight of the 
country's nine new regional 
parliaments were sworn In 
over the weekend and the new 
provincial premiers elected. 
The ANC assumed control of 
seven of the legislatures while 
the National party, led by the 
outgoing minister of law and 
order Mr Hemus Kriel, was 
installed at the head of the 
Western Cape. 

Because of the slow pace of 
vote counting in the province, 
the parliament of KwaZuIu/Na- 
tab where Tnkatha will have a 
wafer-thin majority, will only 
be sworn in cm Wednesday. 


THE FINANCIAL TIMES 
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Rgwneated is Frankfort by S. Writer Brand 

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> FINANCIAL TIMES MONDAY MAY 9 1994 

\ 

l 

"No welcome 
for observers 
in Hebron 


NEWS: INTERNATIONAL 


111 


okv 


\\ i l*p., * 






r to stt 


By Julian Ozantie in Hebron, 
occupied West Bank 

After little more than an hour 
into their peace mission to the 
West Bank town of Hebron, 117 
international observers, 
dressed in bright white uni- 
forms, floppy caps and pin- 
afores, got an immediate taste 
of the problems that lie ahead 
in this flashpoint of Arab-Jew- 
ish violence. 

The observers, from Italy. 
Denmark and Norway, shel- 
tered from Pales tinian stone - 
throwers and Israeli soldiers 
filing teargas. 

They are on a three-month 
mission in an effort to reduce 
tensions between the Palestin- 
ians and armed Jewish settlors 
in the wake of the mosque- 
massacre on February 25 of 29 
Palestinian worshippers by a 
Jewish fanatic. 

The observers were caught 
in the middle of an explosion 
of violence as angry Palestin- 
ian youths shouting “settlers 
out” stoned Israeli buses and 
soldiers responded firing tear- 
gas in the main street 


The observers looked on 
helplessly, wiping their eyes 
from the stinging gas. 

All the observers are 
unarmed and under the protec- 
tion of the Israeli forces. 

Palestinians laughed and 
jeered as the observers scuttled 
for shelter and turned their 
cars around from trouble spots. 
Some shopkeepers offered 
them broken onions to ease the 
effects of the teargas which 
wafted through the air. 

“This is an unexpected wel- 
come but we are prepared for 
our m is sion." said one Italian 
observer. 

Unwelcome by Israel, which 
reluctantly agreed to the 
deployment, the observers also 
seem to have little goodwill 
from Palestinians. Many Arab 
residents in Hebron, which has 
been in a state of tension and 
under curfew since the massa- 
cre, said they did not expect 
the observers to bring much of 
a nhang p in their lives. 

“This is not a solution to our 
problems,” said Mr Abdel 
Kareem Yaghour. “We don’t 
want international people to 


Yemeni units 
from north in 
drive on Aden 


By Mark Nicholson in Cairo 

South Yemeni forces yesterday 
appeared locked in fierce fight- 
ing to repulse northern units 
attempting a drive towards 
Aden, the political and eco- 
nomic capital of the south, in 
what officials in the south 
called the “decisive" battle of 
the intensifying war at the 
southern tip of the Arabian 
peninsula. 

Military and political offl-.. 
dais in the south said at least 
three southern "brigades” - 



President Ali Abdullah Saleh; 
rejected foreign mediation 

each estimated to be anywhere 
between 500-2,000 men - had 
been deployed to counter an 
attempted push towards Aden 
by the Amaliqa brigade, the 
main North Yemen military 
unit based at Zinjibar. 20km 
east of the southern port 

The reports appear to cort 
firm that Mr Ali al-Beidh, vice- 
president of unified Yemen and 
political leader of the south, is 
fighting for Ms political life 
against an outright drive by 
Mr Ali Abdullah Saleh, unified 
Yemen’s president and leader 
or the north, to evict him from 
power and reassert the coun- 
try's disintegrating four-year- 
old unity by force. 

North and South Yemen for- 
mally unified in 1390, but rela- 
tions between the two leaders 


collapsed last year after the 
state’s first multi-party elec- 
tions, when Mr al-Beidh 
claimed southerners were 
politically marginalised. How- 
ever, the two armies were 
never themselves unified, and 
pockets of fighting in north 
and south result from symbolic 
redeployment of northern units 
in the south and vice versa. 

Over the weekend, military 
officials In Sanaa claimed that 
five Scud missiles had been 
launched at targets in the 
north, all apparently landing 
without causing damage. Evac- 
uees from Aden who had 
arrived in Djibouti yesterday, 
meanwhile, confirmed that 
Northern jets had bombed 
Aden airport and power and 
water installations, but said 
that damage appeared limited. 

By yesterday, however, the 
focus of fighting appeared 
firmly to the north and east of 
Aden. Witnesses quoted by the 
Renter news agency spoke of 
30 southern military aircraft 
leaving Aden airport appar- 
ently heading for bombing 
raids in the province of Abyan, 
to the north-east of Aden. 
Evacuees from Aden said 
heavy shelling and bombing 
could be heard from the east 
for the past three days. They 
said there was no evidence of 
fighting in Aden itself. 

Southern officials claimed 
that North Yemeni units had 
been defeated in a second push 
towards Aden from the north, 
at Lahj and Daleah, along the 
main routes into the city. “We 
are in a defensive position, but 
the northern army is not mak- 
ing progress,” said a spokes- 
man for the Yemen Socialist 
Party of Mr al-Beidh in Aden. 

Independent assessment of 
rival claims after more than 
five days fighting in Yemen's 
civil war again proved impossi- 
ble yesterday as communica- 
tions with Sanaa, the Yemeni 
capital in the north, and Aden, 
proved patchy at best 


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Cadaster LOtetaiMr — ' — — 



Israel stresses role of 
US as peace mediator 



Palestinian policemen camp out near the Allenby Bridge on the Israeli frontier yesterday after 
Israel refosed to show them into the occupied West Bank, citing technical problems 


interfere with our lives. Thou- 
sands of Moslems are being 
Irillpd in Bosnia. Somalia and 
the rest of the world and inter- 
national people do nothing. 
Look, these men don't even 


have guns. What will they do 
against the settlers and the 
army?" 

Calming hatred between the 
110.000 Arabs who live in 
Hebron and the 5.000 Jewish 


settlers will not be easy. 

Most settlers live in nearby 
Kiryat Arba but 450 live in the 
heart of the biblical town 
which is sacred to both Mos- 
lem and Jew. 


By Julian Ozanne In Jerusalem 

Peace talks between Israel and 
Syria have reached a new level 
but will depend entirely on 
active US mediation. Mr Yossi 
Beilin, Israeli deputy foreign 
minister, said yesterday. 

In an interview Mr Beilin 
said Mr Warren Christopher, 
US secretary of state, would 
return to the region on Satur- 
day for a diplomatic shuttle 
mission between Damascus 
and Jerusalem aimed at advan- 
cing the talks over the return 
to Syria of the Israeli-occupied 
Golan Heights in return for Mil 
peace. It will be Mr Christo- 
pher’s second Israeli-Syrian 
shuttle in less than a month. 

“1 can’t see any prospects for 
peace in the Middle Bast, espe- 
cially peace between us and 
Syria, without the US,” said Mr 
Beilin who visits London on 
Wednesday. 

“It's impossible to have 
high-level negotiations like we 
had with Egypt; its impossible 
to have a secret channel as we 
had with the Palestinians and I 
don’t see any other mediator 
who is ready to take it upon 
himself. " 

Mr Beilin, however, said 
Syria had made positive 
responses to Israeli proposals 
during Mr Christopher’s last 


shuttle which ended last Mon- 
day. “For the first time in our 
history we speak about with- 
drawal {from the Heights] and 
Syria speaks about peace. It 
never happened before and it 
enables us to find a solution.” 

According to officials Israel 
has offered Syria a three-stage 
withdrawal from the Heights 
over eight years with each 
stage accompanied by deepen- 
ing diplomatic and economic 
ties and security guarantees. 
Israeli newspapers also 
reported yesterday that Israel 
is asking Washington for $5bn 
(£3.35bn) in special US military 
aid to maintain Israel's strate- 
gic advantage over Syria. 

Mr Beilin said until Israel 
reached peace with Syria, 
Damascus could continue to 
veto the establishment of offi- 
cial diplomatic ties between 
Israel and more moderate Arab 
states in the Gulf and Magreb. 
Syria could also successfully 
pressure Arab countries not to 
lift the Arab economic boycott 
of the Jewish state. 

On the Palestinian peace pro- 
cess Mr Beilin said the next 
phase - the extension of 
self-rule from Gaza-Jericho to 
the rest of the West Bank 
-would depend on the desire 
and capability of Palestinians 
to hold elections. If the Pales- 


tinians did not hold elections 
Israel would merely transfer 
limited autonomy or “early 
empowerment" in areas such 
as health and education. 

“It is in our interest to 
enlarge autonomy In the West 
Bank and Gaza...but the elec- 
tions are a Palestinian deci- 
sion," he said. 

However. Mr Beilin, nor- 
mally a dove on the left wing 
of the Labour party, ruled out 
the possibility of evacuating 
Jewish settlements in Gaza 
and the West Bank before 
Israel and the PLO agree a 
final and permanent status for 
Palestinian aspirations by 1998. 
He said the issue of evacuating 
the 120,000 settlers was a 
“time-bomb" which should uot 
be faced until permanent solu- 
tion talks. 

“Undoubtedly most of the 
settlements were built to pre- 
vent agreement on the perma- 
nent solution and we will have 
to face this issue over the next 
five years....but 1 see evacua- 
tion of such a big number of 
Israelis as a big mistake which 
may prevent implementation 
of the permanent solution or 
make it much more difficult.” 
“Evacuating settlements now,” 
Mr Beilin said, "would be the 
biggest boomerang to the peace 
process.” 


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AN EXTRA lOins 
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From mid May we're increasing the space between seats in our Executive 
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you a full 50 indies to stretch out in. 


Nor have we stopped there. Our scats now recline by a further 15' to a 
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You may also be pleased to learn that new members who join the JAL 
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Class before June 30th 1994 will be entitled to a free Economy Class return 
licks L 

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FINANCIAL TIMES MONDAY MAY 9 1994 


NEWS: INTERNATIONAL 


Ideals of Hungary right spumed 


Chrystia Freeland and Nicholas Denton explain socialists’ poll success 


Serbs have 
faith in their 


NEWS IN BRIEF 


Russian 


H ungarians joke that 
the right has achieved 
in four years what the 
communists fade d to pull off in 
40: Mafcp socialism popular. 

On one level, the socialist 
revival is part of a wider east- 
ern European tendency. Like 
their neighbours in Poland and 
Lithuania, Hungarian voters 
are venting their bitterness at 
the pain of the transition from 
communism to a market econ- 
omy by rejecting the parties 
which ushered in the change 
in 1990. 

Tartly, it is a general east- 
ern European phenomenon,” 
explained Mr Ivan Llporacz, 
editor of hvg, Hungary's influ- 
ential political and business 
weekly. “The first reform gen- 
eration has to be punished for 
the prosperity which the eco- 
nomic transition has not yet 
produced.” 

But in Hungary, voters also 
appear to be rejecting the con- 
servatives' vision of Hungary’s 
future, which bears a resem- 
blance to the inter-war past 
The ruling conservative coali- 
tion of the Hungarian Demo- 
cratic Forum and the Christian 
Democrats has tried to make 
the sharpest break with the 
past - even pursuing “war 
crimes” trials of those who 
crushed the 1956 uprising - of 
any post-communist govern- 
ment in the region. 



A young Hungarian boy casts his grandmother’s vote in the elections yesterday 


“The government has tried 
to create an atavistic Hun- 
gary,” says Mr Viktor Poigar, 
who, as campaign manager for 
the socialists in Budapest 
expects to profit handsomely 
from the electorate's lack, of 

PTithnaiafim far tins affhr f Tot 

history is what it is - history. 
You cannot recreate the past” 


Alongside the effort to bring 
back the halcyon inter-war 
put Hungary’s ruling conser- 
vatives have sought to wipe 
out all traces of the ccannnmist 
period. is partly each indi- 
vidual’s own past which is 
being dragged in the mud and I 
think many voters are reacting 
« gain«t that.” said Mr Andras 


Simor, managing director of 
Creditanstalt Securities, the 
Hungarian branch of the Aus- 
trian investment bank. 

hi its efforts to remould the 
Hungarian na tion in its own 
image, the government has 
tried to use the media to 
reshape the national souL The 
government has purged sus- 


pected left-wingers, recently 
jgjpfcing 129 radio journalists, 
among them prominent broad- 
casters, and the conservatives 
at the television station have 
done the government’s nega- 
tive campaigning for it 

Bat the crude pro-govern- 
ment propaganda has back- 
fired, alienating many voters, 
who had their fill of media dis- 
tortion rmifer the communist 
regime- Moreover, attacks 
against liberals and leftists in 
the media have distracted the 
government from the economic 
issues on which the election 
hinges. 

Lack of attention to eco- 
nomic issues has reinforced 
the conservatives’ image as a 
coll ec tion of historians, poets 
and w r i ters who should stick 
to their original professions. 

The irony is that it is the 
conservatives who are paying 
the political price of the pain of 
economic transition, and the 
socialists, who were responsi- 
ble for the communist syste m 
in the first place, who could 
reap the political benefits of 

the market-driven economic 
recovery which has already 
begun. 

The conservatives were out 
of power for a generation; they 
may have condemned them- 
selves to another long spell in 
the wilderness. 


new saviour 


Berlusconi allies 
hold up deal on 
Italian cabinet 


French to urge Airbus 
challenge to US jumbo 


By Paul Betts, Aerospace 
Correspondent, ki Woe 


By Robert Graham from Rome and the security services. 


Six weeks after Italy's general 
elections, media m agneto Mr 
Silvio Berlusconi Is still faring 
problems completing a cabinet 
list that satisfies his own 
requirements and the individ- 
ual demands of his allies in the 
Freedom Alliance. 

The battle over the various 
cabinet portfolios has revealed 
the wide differences between 
the demands of the Northern 
League which needs to retain a 
separate identity from Forza 
Balia and from the neo-fascists. 
It has also shown that Mr Ber- 
lusconi has found it for more 
difficult than he expected to 
produce a government team 
and a coherent programme 
since his landslide victory in 
the general elections of March 
27-28. 

The main, point of contention 
has been the post of interior 
minister - which the populist 
Northern League of Mr 
Umberto Bossi has churned as 
the largest party in parliament. 
It appeared agreement had 
been readied Last Thursday on 
an independent candidate for 
the portfolio which controls 
the administrative apparatus 


This agreement fell apart at 
the weekend because fits com- 
promise candidate declined to 
accept the post The job was 
offered, for the second time, to 
Mr Antonio Di Pietro, Italy’s 
best known anti-corruption 
magistrate. However he 
politely refused the offer, com- 
plicating the choice of a suc- 
cessor. 


If the agreement on the inte- 
rior portfolio between Mr Ber- 
lusconi's Forza Italia and Mr 
Boss! and the neofascist MSI/ 
National Alliance is to hold, 
the post will have to be given 
to an independent figure, prob- 
ably a senior judge. 

However, the continuing 
problems over the Interior Min- 
istry underline the difficult 
balance of interests within the 
Freedom Alliance. 

Mr Berlusconi had hoped to 
finalise the cabinet last week. 
He is under strong pressure to 
present tus list of ministers at 
the latest by Tuesday so that 
parliament can rapidly confer 
a vote of confidence on Italy's 
53rd post-war g ov er nm ent and 
the programme of the right- 
wing government 


Aerospatiale of France will 
press its European Airbus part- 
ners to step up marketing and 
development efforts of a new 
500550 seat large Airbus airlin- 
er - the A3XX - to challenge 
the monopoly of the US Boring 
com p an y in the juxnbo aircraft 
market 

The move reflects concern 
over Boeing’s plans to develop 
a larger version of its Boeing 
747-400 jumbo with a new wing 
to consolidate its dominance of 
the big aircraft market 

Although the four Airbus 
partners - Aerospatiale, Deut- 
sche Aerospace, British Aero- 
space and Casa erf Spain- have 
been involved for the past two 
years in joint studies with Boe- 
ing of the development of a 
very large aircraft, Aerospa- 
tiale is worried that Boeing is 
moving to develop a bigger ver- 
sion of the 747. • 

“We must give Boring the 
strongest possible signal that 
Airbus will develop its own 
jumbo if Boeing derided to go 
it alone with a bigger 747," said 
Mr Louis GaOois, the Aerospa- 
tiale chairman. 

Airbus has suspected that 
Boeing has been using the 
joint studies on a super jumbo 


programme with the Euro- 
peans as a device to delay Air- 
bus’ own efforts to compete 
against its monopoly of the 
jumbo market while it contin- 
ued to study a bigger version 
of the 747. Airbus, however, 
has also continued to pursue 
studies of a 500-550 sealer air- 
liner. “These preliminary 
studies on the A3XX jumbo 
wfil be completed in the next 
few weeks ” said Mr Claude 
Terraraoni, head of Aerospa- 
tiale’s civil a ir cra ft dlviskxL 

Mr Terrazzoni said Aerospa- 
tiale estimated the cost of 
developing the A3XX, a double 
dark j rrmh n airliner, at around 
$8bn. This compares with $6bn 
the Airbus partners spent on; 
the development of the A330- 
A340 family of 350-seat wide- 
bodied aircraft which have 
recently entered service. 

Although only two airlines, 
British Airways and Singapore 
Airlines, have so far shown 
interest in a super jumbo air- 
craft, Mr Terrazzoni expected 
demand for around 500 very 
large capacity airliners costing 
between 3200m and 3250m each 
to emerge within 20 years. 
•Aircraft with over 400 seats 
will account for over 40 per 
emit of tiie value of the civil 
aircraft market in the next 20 
years and Airbus simply can- 


not afford not to be part of that 
market,” be stressed. 

While continuing their joint 
studies, each side Is now striv- 
ing to position tteri f a ftrad of 
the other to launch its own 
super jumbo programmes. TTns 
issue Is expected to weigh 
heavily in the revival of negoti- 
ations in Geneva cm May 19 on 
a new civil aircraft subsidy 
code under the General Agree- 
ment on Tariffs and Trade. 

The talks ware suspended at 
file end of last year when it 
was decided to try to reach 
accord on a Galt civil aircraft 
code by the end of this year. 
But the Europeans fear the US 
has little interest in negotia- 
ting such an agreement, prefer- 
ring to see the civil aircraft 
sector fall into the &aeral Gatt 
subsidy code. 

This reflects differences in 
which the US and European 
aircraft industries are subsi- 
dised. European manufacturers 
rely on direct refundable loan 
support from their govern- 
ments while the US industry 
benefits from indirect res earch 
and development support from 
government agencies. In 1992 
the US and the than European 
Community agreed to limit 
direct support to 33 per cent of 
development costs of new air- 
craft programmes. 


Mr Dragoslav Avramovic. 
governor of the Yugoslav 
National bank, a o w ed that his 
economic programme had vli u 
tually defeated sanctions, after 

he managed to reduce infla- 
tion from 30CMXH) to zero per 
cent overnight 

At a recent dinner in Bel- 
grade, Mr Avramovic said eco- 
nomic expansion was under 
way despite nearly two years 
of UN sanctions, which include 
an oil embargo. 

Across the table, Mr Vladis- 
lav Jovanovic, the foreign 
minis ter of Yugoslavia, 
appealed for the lifting of the 
crippling sanctions, which he 
said, repeating a common offi- 
cial refrain, were “unjust and 
genotidaT. 

The contradictory state- 
marts reveal the coOisian of 
two political roles. Mr Jova- 
novic tries to convince Ms for- 
eign colleagues that peace can- 
not be won without lifting 
sanctions, while Mr Avra- 
movic, who is believed to he in 
Ms late 70s, is responsible for 
boosting public confidence in 
the new Yugoslav dinar, which 
is pegged at one-toone with 
the D-Mark, and the rebirth of 
the Serbian economy. 

In feet, people seem to 
believe in Mr Avramovic, Serb- 
ia’s newest saviour. 

In Belgrade, people thank 
him because they no longer 
have to count out billions of 
dinars to boy a loaf of Mead. 
Their monthly wage has risen 
from DM30 (£12) to DM1Q0. 
Goods have returned to store 
shrives. Even though petrol 
costs DM3 a litre, there are 
more cars on the streets titan 
at any time since sanctions, 
imposed on Belgrade for the 
violent partition of Bosnia. 

The 10m inhabitants of 
Yugoslavia have breathed a 
sigh of relief that they no lon- 
ger have to race against hyper- 
inflation. 

“We have actually overcome 
the blockade. Yugoslavia can 
no longer be blackmailed with 
sanctions, the problem of sanc- 
tions and blockade is now sec- 
ondary,” said tiie ebullient Mr 
Avramovic, a former employee 
of the World Bank, in a recent 
interview. 

But gloomy Belgrade econo- 
mists and businessmen say the 
sanctions and the price of 
nearly three years of waging 
war have devastated the Yugo- 
slav economy. They fear that 
economic recovery cannot be 
sustained without lifting sanc- 
tions and foreign loans. They 
trade predictions on when the 
pr og ramm e will collapse. 

The eboBiesit Mr Avramovic 
says production was expected 
to grow by 30 per cent in April 
in relation to the month 
before. It grew by 24 pa* cent 
In March, according to official 
stat is tics. 


Ebullient bank 
chief has brought 
inflation under 
control, writes 
Laura Silber 
in Belgrade 



JENTO^AI10NAI^jgE^RE^BEVV>| 

Dutch press cool on poll glitz 


NETHERLANDS 


By Ronald van da Krai 


In the eyes of tie Dutch press, 
the staid, stodgy world of 
Dutch politics has been 
engulfed by a tide of “Ameri- 
canisation”. The proof, this 
theory goes, is the campaign 
waged in last week's general 
election. 

The evidence is largely cir- 
cumstantial but undeniable. 
Compared with the studiously 
low-key campaigns of previous 
elections, the 1994 poll was a 
veritable razzmatazz of sound 
rites, photo opportunities and 
competing personalities. 

The glitziest campaign - by 
Dutch standards - was waged 
by the Christian Democrats, 
who also happened to suffer 
the greatest defeat. Mr Elco 
Brinkman, trying to step into 
the shoes of Mr Ruud Lubbers, 
the outgoing prime minister, 
used tactics which his advisers 
had borrowed partly from the 
US and Britain. 

Mr Brinkman’s whirlwind 
tour of the country was made 
In a campaign bus bristling 
with the latest in mobile com- 
munications «nd fax machines 
Hatha- than standing stiffly by 
lecterns during speeches, he 
was hooked up to a mobile 
microphone which allowed Mm 
to roam the stage in what 
became known as the “Brink- 
man shuffle”. And, like Mr Bill 
Clinton appearing on “Larry 
Sing lira" programme during 
the US campaign, Mr Brink- 
man chose to play .the “soft” 
medi a, giving interviews to 
women’s map7in« and under- 
going questioning hum a popu- 
lar comedian. 

His rival in the Labour 
party, Mr Wim Kok, also 


waged a highly personalised 
ca m pai gn . His face stared out 
from election posters stating 
"Choose Kok", with little or no 
me n ti o n made of the unpopu- 
lar party he represents. 

This style of campaigning 
came in for criticism in the 
earnest Dutch press, which 
produces newspapers of vari- 
ous political persuasions, but 
not a single tabloid or sensa- 
tionalist titip 

But the morning after the 
election, Dutch politics was 
back to normal with a ven- 
geance, with attention firmly 
turned back to escructetingly 
intricate speculation about the 
composition of tiie nest coali- 
tion. 

Elections in the Netherlands 
do not produce winners and 
losers even at the best of the 
times. But this year’s result 


was spectacularly inconclu- 
sive, wife fiie two biggest par- 
ties losing ground to two 
smaller “swing” parties, the 
rightwing liberals (WD) and 
the left-af-centre D6B. 

The erstwhile coalition part- 
nos. Mr Brinkman’s Christian 
Democrats (CD A) and Mr 
Bek's Labour party (PvdA), 
lost their majority. This means 
that a coalition of three parties 
wifi, have to be framed from 
the four main parties. And this 
has led in the press to the 
“alphabet soup” speculation so 
beloved of political columnists 
a nd le ader writers. 

Wffl the next government be 
a CDA-PvdA-DB6 cabinet; a 
coalition of strange bedfellows 
like PvdA-WD-D66; or would 
Labour be forced into opposi- 
tion by a CD A-D66-WD group- 
ing? What about tiie option of 


Politician to test water 


on coalition preferences 


The first step towards farm a 
new Dutch government was 
taken over the weekend when 
a senior politician was asked 
to poll the different parties on 
their coalition preferences, 
reports Ronald van da KroL 
Mr Herman Tjeenk WHlink, 
a Labour politician who is 
chairman of the upper house 
of parliament, was appointed 
“infannateur” by Queen Bea- 
trix to assess the parties’ 
views. Last week’s general 
election was inconclusive, 
producing four main parties of 
almost equal strength. 

The ruling Christian Demo- 
crats and Labour lost their 
majority In the lSfeeat tower 
of parliament, while two oppo- 
sition parties, the right-wing 


Liberals and left-of-centre D66, 
made strong gains. Several 
combinations of these parties 
are possible, bat at least three 
parties will be needed to cre- 
ate a majority in parliament. 

Mr Tjeenk Wlllmk’s first 
tad is to find oat whether It 
will be possible to form a left- 
right coalition of Labour, D66 
and the Liberals. This coali- 
tion, described as the “purple” 
option because it would span 
the red of Labour to the 
“Tory” blue of the Liberals, 
would force the Christian 
Democrats into opposition for 
the first time. The Chris ftm 
Democrats, who traditionally 
dominate Dutch politics, sup- 
port the idea of Investigating 
the “purple” option first 


taking on board tiie two new 
pensioners’ parties that had 
come from nowhere to capture 
seven seals? 

Summing up the situation, 
the financial daily Bet Foam- 
aeele Dagblad concluded that 
“a long and bloody” period of 
coalition negotiations lay 

ahpq il 

Other newspapers agreed 
that no firm conclusions could 
be drawn on who would be tiie 
next prime minister, at even 
who would be included in the 
next cabinet 

At the daily De Tdegraaf in 
Amsterdam, columnist Kees 
Lunshof reminded readers thqt 
Labour could make no auto- 
matic claims to anything; even 
though it had narrowly 
emerged from, the fragmented 
balloting as the largest party. 
“There Is no written rule that 
the PvdA must take part in 
government because it is tiie 
biggest,” he wrote. 

In Rotterdam, the NEC Han- 
dels bl ad cautioned in a leader 
that It was too early to write 
off the Christian Democrats as 
coalition members, despite 
their record losses at the polls, 
“ft would not be the first time 
in Dutch political history that 
the loser of an election walks 
away victoriously from the 
cabinet formation.’’ It said. 

In the absence of any. real 
progress in forming the next 
coalition, speculation like tins 
fills column after column in 
the newspapers. Perhaps it Is a 
good idea for newspaper read- 
ers, as well as newspaper writ- 
ers, to start getting used to 
these minute gramfriatfann of 
coalition tactics: after the 1977 
election, for instance, it took 
no less than 208 days for the 
Netherlands to come up with a 
government coalition. 






premier 

sacks 

minister 


Mr Ivan Vujadc, an econo- 
mist at Belgrade University, 
says: “This is no miracle. After 
hyperinflation is stopped, it is 
always followed by a 20-15 per 
cent Jump in production. We 
have not even reached that 
percentage.” 

He says the new dinar has 
enabled people to calculate 
their expenditures, but he 
fears that huge taxes will wipe 
out any small private enter- 
prise. 

Further, economists worry 
that the inflation will soon 
reappear. Mr MDntin Mltrovic, 
editor of Ekonomska PoUtika. 
an independent economic mag- 
azine, points to hidden Infla- 
tion. “Businessmen have taken 
out credits but are unlikely to 


By Leyte Boulton In Moscow 


pay them back, which will 
mean a ret ur n of inflation.” 

“The black market has dis- 
appeared because of the harsh 
penalties from three months to 
three years in prison for sell- 
ing bard c ur rency. But there is 
no real basis for ascertaining 
the value of the dinar,” be 
adds. Mr Avramovic laughs, 
saying his programme has left 
tiie black marketeers of hard 
currency out of woik. 

He says the c o u n tr y ' s cur- 
rency reserves have increased 
by DM450m since the pro- 
gamme was implemented at 
the mid of January. Most econ- 
omists say the budget deficit 
ofDM2£fan represents an awe- 
some obstacle to recovery. 
While Mr Avramovic has suc- 
ceeded in stopping the print- 
ing presses of tiie national 
mint, so far he has not elimi- 
nated the enormous demands 
on the budget For example, 
Serbia alone reportedly sup- 
ports a 100,000-strong police 
force. 

Mr Avramovic claims to 
have discovered a new model 
for economic recovery, which 
he admits was in part due to 
luck public acceptance fo tiie 
new dinar. 

But economists have little 
confidence in the official sta- 
tistics which try to put a gloss 
on the Weak prospects. They 
predict that by September, the 
programme will cave in, 
unable to meet all the 
demands - from the army to 
the farmers. 

Mr Mitrovic says: “It will 
reach the point where the sta- 
tistics cannot disguise the Teal 
situation.” 


Russian prime minister Victor 
Chernomyrdin has sacked a 
deputy privatisation minister 
in an attempt to fend off accu- 
sations that he is moving too 
slowly and ineffectively on eco- 
nomic reform. 

Mr Vladimir Kvasov, the 
prime- minister's chief of staff, 
revealed In a newspape r inter- 
view that Mr Valentin Sych- 
kin, deputy chairman of tha 
Committee for State Property, 
was fired Car felling to provide 
office space for unspecified offi- 
cials. Mr Dmitry Vasiliev, 
another deputy privatisation 
minister and a driving force 
behind a mass sell-off at state 
assets, would be sodded next 
week for not submitting a new 
privatisation plan for later this 
year, he said. 

The criticisms are part of a 
series of attacks from Mr Cher- 
nomyrdin on three ministries 
whose top staff are still closely 
identified wife radical leaders 
forced out of office last winter. 

Infuriating the men in ques- 
tion, Mr Kvasov made public 
the feet that Mr Sergei Alex- 
ashenko, deputy finance minis- 
ter responsible for tiie budget, 
and Mr Yakov Urinsoo. a dep- 
uty economics minister, had 
been scolded for not meeting 
deadlines on issues such as the 
distribution of state invest- 
ment credits. 

He said that the mirdstera of 
economics, finance and privati- 
sation had been given a week 
to “put their departments in 
order". 


Austrian bank 
retrieves funds 


Austria’s trade union bank, 
Bank far Arbeit und Wirt- 
schaft (Bawag) says it has 
repatriated without loss all the 
f unds placed through Caribbe- 
an-based companies controlled 
by the of tiie hank’s chair- 
man. Patrick Blum reports 
from, Vienna. 

The news came as a relief to 
bank supervisors who feared 
Bawag might have ended up 
losing large amounts of money 
as a result of these transac- 
tions, whose recent discovoy 
has led to heated public debate 
about tiie bank and Mr Walter 
Flfrttl, its chairman. 

Mr FWtU admitted last week 
that be had authorised loans 
worth up to Sch2ibn (£U9bn) 
to Caribbean-based ofbhore 
companies controlled by his 
son Wolfgang. 


Italy wins sugar 
refinery deal 


Savola Company of Saudi 
Arabia said yesterday it had 
awarded Italy’s TPL (Tecnoto- 
gie Progetti Lavari Spa) a con- 
tract to build a sugar refinery 
worth $Z7Sm <£U8. 4m), Barter 
reports from Manama. 

The refinery, which wiH be 
the higgest in the Middle East, 
win be built in Jeddah port on 
the Red Sea. 

It will have an awimmi capac- 
ity of 500,000 tonnes of sugar 
and 20,000 tonnes of molasses. 
In earlier statements Savola 
has estimated the refinery 
would cost around SR65Qm 
(£U*L3m). Two Italian compa- 
nies - TPL and Technimont 
Gruppo Ferruza - and Taylor 
Woodrow of the UK had .com- 
peted for the contract ' 


Swedish party 
backs EU 


Sweden’s Centre party yester- 
day voted to support the coun- 
try's application to join the 
European Union, averting a 
po tentia l crisis in the four- 
party coalition government, 
writes Christopher Brown- 
Homes from Stockholm. 

The vote enables the coali- 
tion to present a united front 
on the issue in the runup t° 
September’s general election 
and a national referendum on 
EU membership on November 
13. The Centre's backing for 
membership came followed a 
two-day debate. The margin in 
favour was 184 votes to; 92. 


Kravchuk hopes 
for aid package 

Ukrainian President .Leonid 
Kravchuk hopes a special aid 
package for his country’s 
energy industry can be 
approved at a Group of Seven 
industrial tihAops summit h> 
Italy in July, the Spanish daft? 
El Pais reported yesterday, 
Renter reports from Madrid- 
“It’a difficult to say wWJ 
sum we are talking about bw 
if we were given real aid « 
between JSbn I&Ubn] and 
we would be able to mans# 
the range of possibilities op® 
to ns quite well and not only & 
energy." Mr Kravchuk said. 



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FTNANCIAJL TIMES MONDAY MAY 9 1994 


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: INTERNATIONAL 


Finland, 
Sweden 
join peace 
alliance 

By Bruce Clark in London 

An important new link in the 
security structure of post-Cold 
war Europe will be set in place 
today as Sweden and Finland, 
moving: away from their 
long-standing neutrality, join 
the Partnership for Peace 
devised by Nato. 

At the same time, the West 
era European Union is expec- 
ted to upgrade links with nine 
former communist naHnna as 
well as drawing Turkey, Nor- 
way and Iceland more closely 
into its embryonic efforts at 
military planning. 

The moves come at a time of 
mounting uncertainly over 1 the 
intentions of Russia towards 
both Nato and the three Baltin 
republics, which are among the 
nine nations that the WEU will 
elevate into associate partners. 

While it stiH operat es in the 
shadow of Nato, the WEU is 
expected to grow in impor- 
tance as the US scales down its 
involvement in Europe. 

Moscow stated last week 
that, in matters of co-operation 
with the Atlantic alliance, it 
insists on having a role in 
drawing up the menu, as 
opposed to selecting dishes 
that have already been cooked 
at Nato headquarters. General 
Pavel Grachev, the defence 
minister, also sent shudders 
down Baltic spines by hinting 
that the Russian garrison in 
Estonia, whose withdrawal has 
been promised by August 31, 
might actually be reinforced. 

Unlike the 15 members of the 
former Eastern bloc which 
have become “partners for 
peace," the two Nordic states 
that sign up are expected to be 
givers rather than takers of 
military expertise. Both Swe- 
den and Finland have already 
been lending a discreet hand to 
efforts by the Baltic states to 
build up defence forces. 
MOSCOW'S effort to TnfhiPnre 

the. Partnership from within 
will be aided by the fact that it 
remains a fluid arrangement. 

Only 10 days ago the Part- 
nership received a provisional 
headquarters, in the shape of a 
modest green building at Mans, 
near Brussels, previously- used 
for pl anning the * reinforcement 
of Berlin in the event of an 
East-West crisis. Of the 15 for- 
mer communist states that 
have signed up to the Partner- 
ship, only Poland is. certain to 
assign officers to the Mons 
premises. Even they cannot 
tflfr e up their duties untQ Bel- 
gium clarifies their legal sta- 
tus. 

Two, and possibly three, war 
games within the framework of 
the Partnership should take 
place this year, including one 
naval exercise, and an exercise 
in the Netherlands that will 
focus on peace-keeping. But 
participants have yet to be 
announced. The emphasis on 
peace-keeping is one of the rea- 
sons why Russia does not want 
to be left out Russia remains 
hungry for international 
approval of its “peace-keeping" 
activity on its borders. 

Moscow’s aspirations include 
Russia’s acceptance as a foil 
partner in Nato's deliberations 
on Bosnia; Russian participa- 
tion in other farms of co-opera- 
tion between the top western 
nations, such as the Group of 
Seven; an upward revision of 
the troop numbers Russia is 
allowed by the treaty on Con- 
ventional Forces in Europe; 
and a veto on the elevation of 
other Partnership members to 
foil membership of Nato. 


Financial Times writers look at the pitfalls and rewards which could await foreign construction workers in Germany 

Big wages mask big risks Mixed attitudes to the 

By Amfrew Taylor, tute construction, workers in lower wages on the false ance, British construction /A 4~ /~\ t m s~\ g-% r 

Construction Correspondent Germany. In one month this grounds that UK authorities workers must hold an E101 cer- ill s\ U I I f” I 111 ^ Tr“ I I I I g*A f I \f 

year British consulates in Ger would repay the tax. tificate from the UK govern- “*"*-*• ^ ^ ^ A V/-I- J 

mom? moHa omwrramanfc frt fYrtn rooffoMfip rekn mnnt nwaw m tii w Ik.. * » 


‘Bricklayers 
wanted for 
contracts in 
Germany; 
excellent rates 
offered; 

immediate start’ 

Advertisements in British 
national newspapers continue 
to lure construction workers 
with the promise of high wages 
on German building sites. 

The advertisement above 
was one of more than half a 
dozen job offers which 
appeared on a single day last 
week in Britain's Sun newspa- 
per. 

Some British builders unable 
to find work in the UK have 
made money working in Ger- 
many. For others dream of 
finding a job abroad has 
became a nightmare as they 
have been left destitute and 
cheated by unscrupulous 
labour n yndwi and employers. 

The UK B uilding Employers 
Confederation issued a report 
last week hi ghlighting the 
plight of stranded and desti- 

Thuringia 
in public 
funds 
scandal 

By Judy Dempsey 

The eastern German state of 
Thuringia has been accused of 
persistent misappropriation of 
public funds and abuse of 
office by Der Spiegel and 
Wochenpost, two German 
weeklies. 

If confirmed, the allegations, 
which appear to be substanti- 
ated by the state Audit Office, 
flpnM damage Chancellor Hel- 
mut Kohl's election chances in 
eastern Germany just as his 
governing Christian Demo- 
cratic Union is trying to daw 
back support. Thuringia is 
governed by a CDU/Free Dem- 
ocrats coalition, .led by Mr 
Bernhard Vogel, a west Ger- 
man and a dose aDy of the 
Chancellor. 

The allegations coincide 
with the start of the election 
campaign in Thuringia, which 
faces a local government poll 
on June 12, and state elections 
and federal elections next 
October. Opinion polls give the 
CDU-led coalition less than 23 
per emit of the vote in tbe five 
eastern states. 

The allegations touch sev- 
eral ministers. Id one case, tire 
government sold a state-owned 
clinic to a west Goman com- 
pany for DM7.6m (£3m) 
although Wochenpost alleges 
the real market value 
e x ce eded DM4hn. 

The scandals are expected to 
be greeted with cynicism in 
Thuringia which has endured 
an unemployment rate above 
18 per cent They also reflect 
the unstable nature of the 
state's government Since late 
1990, 25 senior officials have 
either resigned or changed 
office. These include one prime 
minister, five ministers, eight 
state secretaries, three police 
chiefs, and eight regional 
councillors. 


CONTRACTS & TEMPERS 

PROCUREMENT OF CONSULTING SERVICES 
FOR THE REFORM OF 
THE TELECOMMUNICATIONS SECTOR 
IN ECUADOR 

THE GOVERNMENT OF ECUADOR has initiated the process 
of modernising the telecommunication s sec tor and Its main 
telecommunications state enterprise EMETEL, under a reform 
program which is receiving financing from foe World Bank. The 
Government is seeking expressions of Interest and brief 
Statement of Qualifications from consortiums of legal, technical, 
accounting, and investment bankkig firms and promotion firms 
with experience in foe design and establishment of a legal and 
regulatory framework promoting private participation In foe 
sector, including long-term concessions. 

THE REFORM PROGRAM will be implemented by the 
National Council for the Modernisation of the State 
(CONAM) in. coordination with EMETEL. It would involve 
private sector participation the operations and investments of 
the Ecuadoran telephone network to be divided into two 
Regions. 

INTERESTED CONSORTIUMS ARE REQUESTED to send, 
through a sole representative, any readly avaflable Information 
demonstrating legal, regulatory and private participation 
experience in the sartor of telecommunications. Please send 
Statement of Qualifications in English or Spanish, including 
Curricula Vitae of staff that could be assigned in Ecuador and 
diem references of recently completed prefects to foe address 
below prior to May 31. 1994. 

Hr MARCEL LAN1ADO DE WIND 
NATIONAL COUNCIL FOR THE 
MODERNISATION OF THE STATE 
JUAN LEON MERA, 130, 9th Root 
QUrTO, ECUADOR 

FAX; (5932) 509437 


tute construction workers in 
Germany. In one month this 
year British consulates in Ger- 
many made arrangements to 
ship home 150 construction 
workers in distress according 
to the foreign office. These 
were only the workers who 
could find relatives and friends 
who would pay for their fares 
home. 

Many had replied to adver- 
tisements from labour agencies 
with telephone numbers in Bel- 
gian and Dutch towns, such as 
Nijmegen Arnhem close to 
the German border. Most of 
these would be illegal in Ger- 
many under the country’s 
strict labour laws, according to 
the British Building Employers 
Confederation. 

Interviews rarely took place 
in offices but in public places 
such as bars. One London con- 
struction worker found it 
strange when he was inter- 
viewed in an otherwise empty 
building. 

He later realised the furni- 
ture was only temporary. 

Mrs Elizabeth Bridge, the 
confederation's director of tax- 
ation, toured London building 
sites to question workers 
recently returned from Ger- 
many. sho became c on cerned 
after workers requested Infor- 
mation on bow to reclaim Ger- 
man fa»y paid on wages. They 
had been duped into accepting 


lower wages on the false 
grounds that UK authorities 
would repay the tax. 

One scaffolder who answered 
an advertisement in tbe Sun 
paid his own way to a hotel in 
Frankfurt on the promise of a 
job in Dresden. He waited 
three days with about 50 other 
workers but his potential 
employer never arrived. The 
scaffolder was left with a £400 
bill and the agents could not 
be traced. 

A 19-year-old construction 
worker replied to an advertise- 
ment in the i^nrinn Evening 
Standard placed by a Belgian 
agency. 

He was taken to a car park 
development in Germany 
where he spent four weeks 
grinding surface of bricks. 
He was not supplied with a 
mask as required under Ger- 
man and British safety laws. 

After three weeks he had 
been advanced only £30. When 
he complained at the pnd of 
the fourth week he was dis- 
missed. Another worker with 
pypo ppnrp but no fo rmal quali- 
fications was persuaded by an 
agency to accept a job in east- 
ern Germany. 

When he arrived the contrac- 
tor refused to gngag * hrm He 
was left without job and 
money. 

To enable German employers 
to avoid paying national 1n<mr- 




jgsv "s- : 


ance, British construction 
workers must hold an E101 cer- 
tificate from the UK govern- 
ment exempting them from 
making social security pay- 
ments in the “host country". 

British rules allowing work- 
ers to qualify for EI01 certifi- 
cates were tightened last 
month to apply to only those 
“who are normally self-em- 
ployed in tbe UK". This Is 
unlikely to stem cross-border 
work as more than two-thirds 
of UK construction workers are 
estimated to be registered as 
self employed. 

One agency advertising for 
bricklayers in a British news- 
paper offered to arrange E101 
certificates. According to the 
British confederation, builders 
planning to work in Germany 
should check whether agencies 
are bona fide offices and offers 
of work should be in writing 
and checked in advance. 

Workers also should check 
whether they are required to 
register as living in Germany. 
If the answer is negative they 
should not go as they will be 
working outside the law and 
will have no protection, said 
the confederation. Most impor- 
tant of all. workers should 
leave enough money for return 
fares with a reliable friend or 
famil y as British consulates do 
not provide money for fares 
home. 


By Judy Dempsey in Baffin 

Janusz R, a carpenter, has it 

all worked out 

He lives in the Polish town 
of Miedzyrzecz. not far from 
the German border. *Tm far 
better off going over to Berlin 
every couple of weeks. I stay 
with my cousin. And I earn 
lots of money on tbe building 
sites. Then 1 can go home, buy 
building materials, and can 
afford to fa»ka off timw to build 
my own house with my Ger- 
man savings." 

Janusz is just one of the 
many thousands of Poles, Irish, 
Turks and Portuguese who are 
helping to rebuild Berlin. 
“Everybody talks about the 
unemployment in east Berlin 
and in east Germany. But 
these east Germans just don’t 
want to get their hands dirty." 
said Mr Wolfgang Korich, a 
supervisor of a building site in 
east Berlin’s Mitte, once the 
heart of Berlin before the sec- 
ond world war and now a 
prime development area for 
shopping and office complexes. 

Mr KOhrich, however, has 
few complaints about his for- 
eign workers. 

“They work in all kinds of 
weather. We don’t have to pay 


them bad weather money," he 
said. "And my foreign men 
work at least 60 hours a week. 
None of this seven-hour-a day 
nonsense. And they don’t drink 
on the site either, unlike some 
Germans who have the beer 
bottle open by 8am,” he contin- 
ued. 

Yet some foreign workers, 
such as Mr Vincent Kelly who 
arrived from Ireland several 
months ago. complain about 
wages. "There’s no work at 
home. So I am lucky to get 
work here. But when I com- 
pare what I earn to a German, 
it really makes me angry,” he 
said. 

Mr Kelly says he earns DM25 
an hour before tax. "But the 
Germans earn DM38 - and 
that’s the minimum paid to an 
unskilled worker, if such a 
thing exists among the Ger- 
mans. After all the tax is 
deducted, 1 take home about 
DM13 an hour while they get 
DM24. Its not fair.” 

Mr KOhrich admits he pays 
his foreign workers at least a 
third, if not a 50 per cent, less 
than his German crew. 

A hundred yards down the 
street, a team of 200 workers 
were hard at work; there was 
hardly a German on tbe site. 


"Half of us are Portuguese. The 
other half is Polish." said one. 
“We do the excavation work, 
the Poles do a lot of the scaf- 
folding. The wages vary. What 
would you expect?" 

But the Association for the 
German Construction Industry 
is furious about the number of 
foreigners working in the 
building sites throughout east- 
ern Germany. 

"Some local councils, city 
authorities, and building firms 
are contracting out to foreign 
companies because they can do 
things more cheaply," said Mr 
Heiko Stiepelmann, the associ- 
ation’s spokesman. "This 
means competition. TTiis could 
affect the wage levels in the 
industry." 

Janusz laughed when he 
heard this. "And show me a 
site which only has German 
workers,” he quipped. 

“These Germans ore just too 
overqualified, or else they get 
paid too much when they are 
out of a job. 1 think that’s the 
reason why there is a shortage 
of construction workers," he 
said. “I don’t know what the 
association is complaining 
about. They get us cheaply. 
The work gets done. So they 
should stop grumbling." 











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Don't let the boyish grin fool you. Beneath is arguably the 
sharpest business mind east or west of the Mississippi. A self-made 
billionaire at 44. But money's not the story. It's about building. Creating 

A 

the nation's largest cellular network service through a series of daring 
strategic moves. Piece by piece. It's about playing David before all the 

Goliaths. Grace under pressure. Betting the farm. And smiling through'it all. 

* *< 

Craig McCaw, CEO McCaw Cellular, is just one of over v, 
857,000 top American executives who read Forbes. 


CAPITALIST TOOL 






FINANCIAL. TIMES MONDAY MAY 9 1994 


NEWS: UK 


Row over allocation 
of EU training funds 




By Paul Gheeserfght 
and John Wfllman 

The British government is 
refusing to submit plans for 
spending £520m of European 
Union funds available to the 
UK for retraining workers in 
industries undergoing struc- 
tural change, such as the 
motor industry. 

Ministers believe that the 
money would be better spent 
mi training for the unemployed 
and that employee training is 
the responsibility of employers. 

But the decision has caused 
dismay among local authori- 
ties, motor industry companies 
and training and enterprise 
councils in areas of industrial 
change such as the Midlands. 

“When funding is already 
there and we’re turning our 
back on it, it is extremely frus- 
trating, ” said Mr John 
Hawksby, a Bedfordshire Con- 
servative councillor who is 
chairman of the all-party 
Motor Industry Local Author- 
ity Network (MILAN). This 
organisation brings together 
local authorities that have a 
strong local interest in the 
motor Industry. 

The money is the so-called 


Objective Four fending, which 

can he spent over the nest five 
years. Although the money 
conies from Brussels, national 
governments administer it and 
must give the European Com- 
mission details of their spend- 
ing plans. This, the UK govern- 
ment has refused to do for 

1995-96. 

“We believe that the money 
could be better used in helping 
the unemployed under Objec- 
tive Three of the structural 
funds which provides training 
for the unemployed,” the 
Department of Employment 
said last week. 

Any money spent on Objec- 
tive Four funding comes out of 
the budget for Objective Three. 
By not applying for Objective 
Four funds, the government 
hopes to maintain current lev- 
els of EU funding for unem- 
ployment programmes. 

However, Mr Rodney Skid- 
more, chief executive of Cen- 
tral England Training and 
Enterprise Council, says with- 
holding Objective Four funds 
Is making it harder for TECs to 
assist in reskilling local labour 
forces. 

EU funds are being used for 
retraining in France and Ger- 


many. Mr Christopher Firth, 
director of MILAN, fears the 
current competitive advantage 
enjoyed by the UK in motor 
manufacturing will be eroded. 
“We all know how mobile the 
motor industry Is," he said. 

Several motor industry 
groups such as Ford, Vauxball, 
Unipart and Rover want to tap 
Objective Four funding, Rover, 
which is spending £35m a year 
on training, says that it has 
received no European funding. 
• Trade onions could frus- 
trate employers' opposition to 
the Europe- wide workers' 
councils proposed by Brussels, 
a labour leader said yesterday. 

Mr John Edmonds, general 
secretary of the GMB union, 
said employers who held out 
would be taken to court. 

“If any European company 
says . . the works councils will 
not operate hi Britain, then we 
have a very strong legal case,” 
he told BBC television. 

The new councils would 
come into force under a Euro- 
pean Commission directive 
which requires businesses 
operating in more than one EU 
country to set up Europe-wide 
committees to involve and con- 
sult all their employees. 






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Post Office chief in privatisation talks 


By Roland Rudd 

Mr Bill Cockburn. chief executive of the 
Post Office, has held detailed talks with 
a senior team from SG Warburg about 
how best to privatise the corporation. 

The talks are the furthest yet the 
corporation has gone in pursuing 
privatisation. Senior executives are 
keen to push ahead with plans for a 
partial privatisation of the Post Office 
even though the government is yet to 
announce the results of a review of the 
Post Office's future. 

Mr Cockburn said: “If the government 
decides to privatise the Post Office all 
the indications we have are that 
investors looking at our business and 
our track record find it a very 
attractive proposition. Warburgs are 
confirming this.” 


However, Mr Michael Heseltine, trade 
and industry secretary, has said there is 
a strong case for privatising the Royal 
Mail, but has conceded that political 
issues make it difficult to do so. 

Mr Cockburn, while careful not to 
call publicly for privatisation, wants 
the government to act speedily if it has 
decided to sell it offi 

Following his talks with Warburg he 
yesterday said his preferred method of 
privatisation was to float off the Royal 
Mail along with parcels, which the 
government is already committed to 
selling. 

“If the government want to privatise 
the Post Office, it makes best 
commercial sense to keep the Royal 
Mail and parcels together as one 
company. No other post office has hived 
off its parcels division." 


Mr Cockburn feels that the Post 
Office's public obligation to provide a 
parcel service through the country, in 
contrast to its 4,000 privately-owned 
competitors, gives it a natural fit with 
letters. 

He believes the interest shown in any 
UK postal sale from institutional 
shareholders faidng part in the sale of 
Dutch post office may encourage 
ministers to act on the 
recommendations of their review which 
favoured privatisation. 

However, Mr Cockburn warned that 
in the event of privatisation the 
government would have to be careful 
not to over -regulate the business which 
could depress profits and the share 
price of a private post office. 

Hoare Govett, the UK stockbroker 
owned by ABN-Amro, which is the 


global coordinator in the privatisation 
of the Dutch telecom and post group, 
has reported similar strong interest 
from investors. 

Mr Nick Verey, deputy chairman of 
Warburg Securities, is expected to 
pr piaiw his methods of privatising the 
UK post office when he speaks at a 
Westminster and City conference on the 
subject next month. 

The UK merchant bank also reported 
si gnificant interest in any UK postal 
flotation from institutional 
shareholders taking part in the 
privatisation of Koninklijke PTT 
Nederland, the state-owned Dutch 
telecom and postal group. 

Warburg is the lead. UK regional 
manager in the Dutch postal 
privatisation due to take place next 
month. 








I. o 




FINANCIAL IZVESTIA TALKS BUSINESS TO 300,000 
INFLUENTIAL RUSSIANS EVERY THURSDAY. 

Financial Izvestia is an 8-page weekly business newspaper produced by the Financial 
Times in partnership with Izvestia, Russia's leading independent daily. 

Printed on the FT’s distinctive pink paper, it accompanies Izvestia every Thursday. 

Drawing on the huge editorial network of both newspapers, it brings up to the minute, 
accurate, national and international news to 300,000 decision makers in Russia. News from 
around the world that impacts upon the Russian market, making Financial Izvestia an 
essential and unique business tool for those shaping the new Russia. 

To find out more about advertising to these influential people call Ruth Swanston at the 
Financial Times in London on 44 71 873 4263 (fax 44 7 1 873 3428), Stephen Dunbar-Johnson 
in New York on 1 212 752 4500, Dominic Good in Paris on 33 l 42 97 06 21, Sarah Pakenham- 
Walsh in Hong Kong on 852 868 2863. 

FINANCIALTIMES 


Britain in brief 

mk 


British Telecommunications hoisted a dish aerial at the weekend to carry their first satellite 
npUtiV site in France. The uplink was installed at BTs Eurocenter, La Defense, Paris. The new 
facility will be used to provide satellite networks for customers such as Gronpe Azur, the large 
French hnmram y group, winch "tey BTs technology In the face of been competition 


Investment 
trusts to 
target US 
market 


By Bottom Hutton 

Representatives of the UK 
investment trust industry 
arrive in the US today to press 
for legislative changes that 
would allow investment trust 
shares to be sold to US inves- 
tors. 

A delegation from the Asso- 
ciation of Investment Trust 
Companies will be lobbying 
for changes to a protectionist 
law of 1940 which makes it 
almost impossible for shares 
in foreign investment compa- 
nies fo be sold in the US. 

The law effect i vely requires 
foreign investment companies 
to operate as US companies, 
under US regulation. Only 19 
have ever managed to comply, 
all of them Canadian. 

Unsuccessful attempts have 
been made in the past to over- 
come the obstacle. Mr Ernest 
Fenton, the association's direc- 
tor-general, said there were 
signs that the new administra- 
tion was more amenable to 
dismantling protectionist bar- 
riers. 

A possible solution is for US 
authorities to recognise UK 
regulation as being an equiva- 
lent standard to the US, with- 
out requiring compliance with 
exactly the same rules. 

Mr Patrick Gifford, chair- 
man of Fleming Investment 
Management and a member of 
the association's delegation, 
said that expanding into the 
US market would not only give 
UK investment trusts a wider 
potential investor base but 
might also make it feasible to 
launch new funds for which 
the UK market alone wo aid 
not provide sufficient demand. 

Mr Fenton said one attrac- 
tion of UK investment trusts 
for US Investors was that 
while many US closed-end 
funds trade at substantial pre- 
miums to asset valne, UK 
funds normally trade at dis- 
counts or very small premi- 
ums. Additionally, UK invest- 
ment houses could offer 
greater expertise in certain 
specialist areas than their US 
counterparts. 

Even without changes to the 
1940 act, it is possible that 
investment trusts could issue 
American Depositary Receipts 
which are traded like shares 
on US stock exchanges. How- 
ever, these could only be 
bought by qualified institu- 
tional buyers, not private indi- 
viduals. 


Warning on 

city-centre 

regeneration 

Mr John Gummer, the UK 
envinixunent secretary, will 
reinforce his commitment to 
revitalising Britain’s town 
centres tomorrow with a 
report which warns that 
property owners and financial 
ins ti t u tions must invest in 
cities or risk them becoming 
US-style “ghost t owns" . 

The report warns that UK 
cities face a choice between 
the North American example, 
where retailing has been 
sacked oat of many town 
centres, and the continental 
European model, where high 
population density, good 
transport facilities and 
attractive streets have kept 
city centres popular. 

It stresses the need for 
property owners and 
investors, including insurance 
companies, banks and building 
societies, to play a part in 
regenerating urban centres. 

If that is not achieved 
voluntarily, it suggests, the 
only solution might be 
US-style business development 
districts, where property 
owners must pay a local levy 
to fond town-centre promotion 
and improvements in the 
urban environment. 

Construction 
recovery doubts 

UK civil engineers are 

becoming concerned that the 
construction recovery may 
be beginning to lose pace, 
according to a survey of more 
than ISO companies today. 

The survey, by the 
Federation of Civil 
Engineering Contractors, 
reveals that there has been 
a disturbing decline tu 
invitations to tender for work 
during the first three months 
of this year. 

The precaution of companies 
reporting a fall in invitations 
to tender compared with 12 
months earlier has increased 
from 18 per cent to 27 per cent 
since the Federation's previous 
survey published at the 
beginning of this year. 

The proportion reporting 
a rise in tender invitations has 
fallen from 43 per cent to 27 
per cent 


Ex-Tory voters 
want Major out 

The majority of 
ex-ConservatiTC voters want 
Mr John Major to resign, 
according to a Gallup opinion 
poll conducted for the BBC. 

In a poll of 988 people who 
voted Tory in the 1992 general 
election but said they would 
not or were not inclined to 
vote Tory if there was a 
general election tomorrow, 

58 per cent said Mr Major 
should resign. Only 34 per 
cent said he should cany on. 

Among this group of voters 
the Conservatives are less 
trusted on tax than TibThhit 
the poll found. Eighty-eight 
per cent said they would not 
believe a Conservative 
politician talking about taxes, 
while 32 per cent wouM not 
trust a Labour politician on 
the subject 

Mr Michael Heseltine was 
the preferred choice to replace 
Mr Major, with 34 per cent 
of these farmer Tory voters 
saying they would vote 
Conservative if he was leader. 

Car dealerships 
expand rapidly 

Significant changes are under 
way in the structure and 
ownership of frandhised car 
dealership networks in the UK 
with forge groups expanding 
rapidly at the expense of 
iixhvidually-owned 
dealerships. 

The main groups such as 
Lee Service and Inchcape now 
own more than a third of the 
7,009-plus franchised 
dealerships compared with 
just a quarter in 1990, 
according to Sewells 
International, the motor-trade 
monitoring group. 

Some of these groups are 
also beating down 
manufacturer resistance to 

**rr \q\H- fr anrh!«ang , ‘ - s alting 

more than one make from a 
sin gle site - and loading the 
expansion of UK car retailing 
methods into continental 
Europe by buying dealerships 
in other EU countries. 

New head for 
Manchester 

Manchester Business School 
wffl today name Professor 
John Arnold os its new 
director. 

Prof Arnold is currently 
pro-vice chancellor of 
Ma nche ster University and 
its KPMG Peat Marwick 

Professor of Accounting. He 

takes up the post on 
September 1. 


Record companies 
upbeat over 
CD price probe 


By Michael Skapinker, Leisure 
Industries Correspondent 

Record companies axe 
increasingly confident they 
will be cleared by the Monopo- 
lies and Mergers Commission 
of charging excessive prices for 
compact discs but say they are 
stOl unsure whether leading 
music retailers’ large market 
share will be criticised. 

The commission's report on 
the music industry, launched 
last year, was sent to the 
Department of Trade and 
Industry last month. The DTI 
said yesterday that recent 
reports on the outcome of the 
inquiry were “speculation”. 
Music companies say they 
have stffl not seen the commis- 
sion's report 

Record industry executives 
say, however, that the tenor of 
their correspondence and meet- 
ings with the commission has 
led them to conclude that the 
inquiry had moved away from 
the CD pricing question to the 
issue of music retailing. 

The Commons national heri- 
tage committee report last year 
criticised music producers and 


record retailers for charging 
too much for CDs. It said 
mnsi c companies bad faile d to 
justify the difference in the 
prices they charged UK and US 
dealers far CDs. 

The price difference an fall- 
price discs was between £L50 
and £2. The committee was 
even more critical of the indus- 
try for charging dealers £250 
more for compact discs than 
for cassettes. 

Music companies say, how- 
ever, that they expect the com- 
mission to accept that many 
co nsume r products are more 
expensive in the US than in 
the UK and that British CDs 
are the cheapest in Europe. 

Industry executives believe 
the position of music retaflere 
is tess clear. The national here 
tage committee said last year 
that the retail market was 
dominated by WH Smith, Our 
Price, Virgin, Woolworfh and 
HMV, who together controlled 
54 per cent erf UK music stores. 
Last March, WH smith, owner 
of Our Price, said it was BMf 
ing the chain with Virgin 
Retail, with which it had previ- 
ously bad a joint venture. 



FINANCIAL TIMES MONDAY MAY 9 1994 


7 





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THE WEEK AHEAD 


DIVIDEND & INTEREST PAYMENTS 


■ TODAY 

Allas Copco A SKR9.0 
Do. B SKR9.0 

Bank of Montreal Realty Inc. 9K% 

Nts. 1996 C$475.0 

BBam(J)3.lp 

British Peiroiaum 3.1p 

British Vtta a75p 

Church & Co. lop 

Dixon Motors ~1.5p 

IntL Bank for Reconstruction & 

Dvtpnwt 11VM6 Ln. 2003 £5.75 

Johnston Press 4.5p 

Kwfk-fit Hldgs. 2L3p 
Mazda Motor FRN Aug. 1996 
Y 63826.0 

Da FRN Nov. 1996 Y63826.0 
Nat Wisst Bank 12.1p 
New Throgmorton Tst (1983) 1 J5p 
Salnsbury (J) 8V*% Bd 1996 S4S&0 
Santander Fla Issuances 7% 96 Bd. 
1996 (Wrmts) $375.0 
Do. (Without Wrmts) S375.Q 
Schotes 1.7p 
Sirdar 1.72p 

Smith & Nephew 496 Cv. Bd. 2002 
£40.0 

Staring PubSshing 0.7p 
Sumitomo Metal 71696 Bd. 1999 
Y7 12500.0 

Da 71696 Bd. 2001 Y71 2500.0 
Thailand Int Fa.Ptg.Sa30 
Wtmpey (Gaorge) 3.25p 
WSP 0.9p 

■ TOMORROW 
American Express $0.25 
Barclays Bank Jnr. Gtd Und. FRN 


S85ff4 

Bristol a West Bldg. Scty. FRN 1994 
£129-54 

Community Hospitals 2.8p 

Oaky Farm Cv. Pf. (Bermuda) $65.0 

Do. (Hong Kong) S65J3 

Da (Jereey) S65U 

Engtoh 8 Dutch Irrv. Tst. 896 Gross 

IStCm-PtFLOSO 

Da 896 Gross 2nd Non-Cm. Pi. 

FULSO 

GN Great Nordic DKR1JLO 

Healthcare Operators Class B Mtg. 
Bckd. FRN 2021 £191.66 
Inchcape 6K% Cv. Bd. 2008 £31.25 
MTL Instruments 2Jlp 
NT & T 10% 96 Bd. 2001 £108.75 
P & O 696 Cv. Bd-Fsst Ser. 1989 
5150.0 

Scottish Eastern Inv. Tst I.OUp 

■ WB3NESDAY 
MAY 11 

Cotteterafead Mortgage Sea (No. 12) 
Class B Mtg. Bckd. FRN 2028 
£1KL32 

First National Bldg. Scty. 119696 
Perm ML Brg. IR£S68.75 
Da 119*96 Perm bit Brg. (RC587JS0 
Gresham T e l ecomp uting 0.27p 
Mazda Motor FRN 2000 YB1573.Q 
Nppon Express 696 Bd. 1999 
Y600000.0 

North Housing Assoc. 89*96 Gtd. 

La 2037 £4.375 
Parfoas French Inv. Tst Ip 
RentokO <L01p 
Telegraph 7.5p 


■ THURSDAY 
MAY 12 
Appieyard 2.9p 
Armour Tst 0.38p 
BPP Hldgs. 5.8p 
BBE.EA2.5p 
Candover lnv& 7.05p 
CU Envnmtl. Tst CL5p 
Dowding & MHs 094p 

Inv. Tst of Guernsey 1.725p 

Mediterranean Fd. D.75p 

Nations* Express 5p 
Standard Chartered Und. Prim. Cap. 
FRN (Ser2) $191.68 
Trafford Park Estates Q.95p 
WoWmhckm Rink ii.2p 

■ FRIDAY 
MAY 13 
Barclays &05p 

BICC 696 1st Cm. Pt 23.0 

Do. 51696 2nd Cm. PT. £225 

Broadcast!® 0.75p 

Christies Int l-5p 

Edinburgh Fd. Mngrs. 18p 

Estates & Agency 3,5p 

Euro-Vtp Sac. Var. Rate Nts. 2030 

$23442.01 

Evans Hatehaw 92p 

EW Fact 2_98p 

Galas (UK) 4»96 Rd. Db. £2.125 
Gent (SR) D-9p 

Housing Finance Corp, 89696 Db. 

2023 £5A088 

Kleirvwort Dev. Fd. 2.75p 

North Sea Assets l.lp 

Persona) Assets Tst loop 

Pittards Ip 

Psion 1.8p 

Rosebys 3J25p 

BPS IJp 

Rugby Grp. 3-B2p 


UK COMPANIES 


■ TODAY 

COMPANY MEETINGS: 

BPP Mdgs. AfaSne Ptam. 142-144, 
Uxbridge Road. W„ iiJO 
Coshrin, konmanflcre Hal. D w Uca n. 

E.C., 12.00 

JW Op, 25. Oopttiafl Avenue. E.CL. 

12.15 

Mritotl, 141, New Bond Street W„ 10.00 
Maneti e nt u Tet, 10. F enchure h Street. 
EC.. 1230 

Scottish Eastern inv. TaL, Sadie Court 
20. Caste Terrace. Edfatough. 12J30 
BOARD MEETINGS; 

Finals; 

Babcock ML 
Brawn |NJ Grp. 

Chortwel Grp. 

Park la nd Grp. 
i*i uw ui 19 
Interim s : 

API Grp. 

MMT Computing 
SUm Grp. 

■ TOMORROW 
COMPANY MEETINGS: 

Argo* CM Conferanco Centre, Cartie 
Point New Oxford Street, WjO, 11.15 
Brttfab Poiyiheoe fodm. 96, Port Gtasgow 
Road, Greenock. 12.00 
EstetM A Qeneret WuNngton Hold. 
Cuizon Street W., 1030 
Brans IWatm, SoBn* Motor vnago, 
838. Started Road. SHriey, 12.0Q 
Low A Boner, Boner House, Faraday 
Sheet Dundee, 12.00 
Ropner, Btackwefl (tango Moat House. 
Dlnriiwa* Grange. Darffogton, 1230 
SmBh & Naphne; Ouean Btzabeth a 
Conferanoa Centre, Broad Sanctuary. 
S.W„ 1130 

TUcedng Qrpu. 22. Tudor Street EO. 
1200 

UKL BtoouKe, Won Hotel, 22, Park 
Lane. W„ 1230 

Utd. Newspapers, Stationers HeA Am 
Maria Lane, EC, 1130 
WBaon Bowden, Grand Hotel, &anby 
Street Leicester. 1230 
BOARD MEETINGS: 

Fkwhc 


ChestsriMd P ropertle a 
Duiloa House dip. 

Drayton Bhie Chfo T«t 
Schroder Korea Fund 
Tfcne Products 
INM Corrooa 
Martas: 

Bearing P ower IntL 
Hotama A Rtarctant Orp. 

KwHc Servo Grp. 

Vaux Grp. 

■ WEDNESDAY MAY 11 
COMPANY MEETINGS: 

Barr A WiWn Arnold Tat. Ktnn Hotel 
Ntrrite Street Leeds, 1200 
B tl B ah- B omeo P et ra la mq 4. tOnQS 
Anne Yard, EC., 1230 
Era OrpL, Forte BoMhouso. Braatapear 
Way, Hemal Hempstead. Harts., 11.00 
Quretsan, IrMRute or Chartefled 
Acoottaants, Moorgsta Place. E.C., 1200 
tnatacn. The Savoy. Strand, W.C., 1130 
hit Buaineaa Ooaan m i ca Bo na , Cafs 
RoyA 88, Regent StraoL W.. 1230 
Johnaon <houp Cteanera, Atlantic Tovrer 
Hotel Chapel Street Liverpool. 1130 
Ktobtwort Somler Co”* kiv. TaU 10. 
Fenchureh Street EO, 1230 
Unread, artanghem Chamber at 
Comnwros 75. Harixama Road. 
Birmingham, 1200 
Mohote (JN) (Vknto), Ladaon Road. 
WyOwstswre, Manchester, 1130 
RT2L Quesn Btzabadi I Conference 
Centrs Broad Sanctuary. 5.W.. 1 1.00 
Spare tJW), Richard House, Enatona 
Road, EriMd. 1230 

Sptax-Sarco, Queens Hotel, Cheltenham, 
3.00 

BOARD MSTMQS: 

FMC 

Ctdraa cte noa 
Beming Far Eastern kw. 

ReeHUgs 

SMnriiurylA) 

Scottish P o wer 
SmuS (JeOaraon) Orp. 
biterima: 

Avon Rubber 

BUy(JJASone 

ChennML 


GraenalaQrp. 

Lynx HMgs. 

Royot Bank 0< Scotland 
Schroder BpMt Fund 

■ THURSDAY MAY 12 
COMPANY MEETINGS: 

Aatae (BSR), Stdnnera Hal, 816. Dowgaie 
HB. EC, 1130 

Banter Qrj?_, The Savoy, Strand. W.C., 
1030 

Broadcasdo, Saisbury House, London 
WU, ECL. 1230 

Canning (W), Canning House. St Pauls 
Squaa, BnMMham, 1230 
Caradon, nalaurera Hafl, 1, London 
WaS.EC., 1230 

CaOkf» (Hugs), WDartry Manor Hotel 
WsB Lane, WSfarby. Hui. 3.00 
Ctyda Petrokun. Butchers Hal, 
Barthatomew Close. EC., 1200 
Crode hit, PtSntera Hal, S. Little Trinity 
lane. EC, 1230 

Edtaburgh Fund Mngra, Donakhon 
House, 87, Haymarkat Terrace, Etdntouigh, 
1215 

Bnaaa, 60. Station Street W., 11A6 
Ffshar (James), Lfcdoonio Hotat 
BarmaHh-fumasa, 1200 
Brasahy, Barbar-Sugeons HaO, Monkwel 
Square. Wood Street EC, 1200 
Lopax, Waldorf Hotel. Aidwych. W.C, 
1030 

North MtenSc SntaOar Go's inv. Tet, 

3a Queen Anne's Gate S.W, 1030 
Page (MchaeO, 39-41. Parker Street 
W.C, 1230 

Portals, The Savoy, Stand, W.C. 1230 
( te ttib o iio Brother s, Goring Hotel 
Beeston Place. &W„ 230 
Iteltand Tat, Rutland Gardens, S.W, 
1200 

Scholl, Sk Christopher Wrens House 
Hotel. Thames Street, Windsor. 1200 
T&N, Ramada rtenriss a nco Hotel 
Bteritbi a rs Street ManchsNar. 1200 
Tl Grp, Qtaztere HsA 0, Montague Ckrae, 
S-E, 1200 

Mnlan Grp, The Brewery, Chiswal 
Street EC, 1200 

Woktaiihobna Wnk. Last Drop Hotel, 
Bromley Cross, Bolton, 1230 


Scottish Eastern Inv. Tst 496 Db. 
£ 2.0 

Da 496 ParpL Db. £20 
Vfctaullc 5.5p 
Vrvat Hldgs. 125p 

■ SATURDAY 
MAY 14 
P&PI^P 

■ SUNDAY 
MAY 16 

Abbot Labs. $0.19 
Affiance TaL 4)696 Db. £225 
Barclays 1696 Un. Gap. Ln. 2002/ 

07 £8.0 

Birmingham District Council 11)696 
Rd. 2012 £5.75 

Convaraton 9^96 2006 £4.875 
Conversion 10% 1996 £5-0 
Exchequer 18)6% Ln. 1998 £8.625 
Foreign & Colonial Smaller Go's 
5% Cm. Pf. £2.10 

Forth Porta Authority 39*96 Fd. Debt 
£1375 

Glasgow Corp. 3V6% IntL £1.75 
Da Gas 69*96 Ann. £3375 
Da Gas 996 Ann. £4^0 
Do. Water Anns. 50p 
Do. Waterworks Fd. Debt 3V696 £1.75 
Da Waterworks Fd. Debt 496 £20 
Hambros Inv. TsL 596 Cm. PT. 1.75p 
Inter- American Dev. Bank 99*96 Ln. 
2015 £4.875 

Nova Corp of Alberta C$0.06 
Scottish American Inv. 496 Iml Db. 
£ 2.0 

Scottish Mortgage ATat 4)696 Db. 

09 Vi 

Second Afiance TsL 4)696 Db. £2.25 
TSB G4t Fd. Ptg. Rd. Pf . 2p 
Traastey 129*96 Lit 1995 £8375 


BOARD MEETINGS: 


Capital House kttL Growth 
City of Oxford kw. Tat 
Hntay [Jamoo) 

French Comacdon Orp. 
Huflhee CT-L) 

I $ 8 UK SrnaBer Co. Tst 
Warner Howard 
lntertus: 

AG lodge. 

(tand MatropoOtan 
Huntingdon IntL Hldpa. 
Jereey Bectridty Co. 
Morgan Gnenfafl ErpGy 
Overseas few. TSL 
Shaftekbwy 


■ FRIDAY MAY 13 
COMPANY MEETINGS: 

Brtamla Aa Muawj B.'nstang Centre, 
53-57, Woke Green Road. Moseley. 
Bkmtngham. 1200 
□Inlde HoaL Forte Crest Hotel RBon 
Rwxt Hambrook. Bristol 1230 
Ffrad Earth Tleo, Twyteti MU, Oxford 
Road, Addarbury, Oocort, 1200 
Forw a rd Technology, tt ewara Hal, 
Aidermenbury Square, EC, 1230 
QoM PatrahMaii, WMbuy HoteL Conduit 
Street W, 1230 
Hornby Grp, Great Danes Hotel. 
HoBnglboume. Makteone. 1130 
Pearson, MPbor* Tower. MKsank. EW, 
1200 

SunMgh, 100. Wood Street EC, 1030 
BOARD MEETINGS: 

Finals: 

Appleby Westward Grp. 

Value & Income Tst 
h tfarfc na: 

Homing Chinese kw. Tst 
Ntfst Mestrial hap. Tat 

Company meetings are annual general 
m aat t i ga antes o tf ien v ae stated. 

Please note: Reports and accounts era 
not norraafy avaleble und appreudmaiely 
six weeks after the board meeting to 
approve ihe pretankrery resulte 



Jf 

rainforests arc 
being destroyed 
the rate of thousands 
trees a minute, how can planting 
just a handful of seedlings make a difference? 

A WWF - World Wide Fund For Nature tree 
nursery addresses some of the problems lacing people 
that can force them to chop down trees. 

Where hunger or poverty- is the underlying cause 
of deforestation, we can provide fruit trees. 

The villagers of Mugunga. Zaire, Ibr example, cat 
papaya and mangoes from WWF trees. And rather than 
having to sdl timber to buy other food, they can now 
sell the surplus fruit their nursery produces. 

Where trees are chopped down for firewood. 
WWF and the local people can protect them by planting 
fast- growing varieties to form a renewable foci source. 

This is particularly valuable in the Impenetrable 
Forest, Uganda, where indigenous hardwoods take 
two hundred years to mature. The Markhamij loica 
trees planted by WWF and local villages can be 
harvested within five or six years of planting. 

Where trees arc chopped down to be used ibr 
construction, as in Panama and Pakistan, wc supply 
other species that are fast-growing and easily replaced- 

These tree nurseries are just part of the work we 
do with die people of the tropical forests. 

WWF sponsors students from developing countries 
on an agroforestry course at UPAZ University in 
Costa Rica, where WWF provides technical advice on 
growing vegetable and grain crops. 


Unless 
help is given, 
soil is exhausted 
vers- quicklv by “slash 
and bum” fanniug methods. 
New tracts ofcropical forest would then have 
to be cleared every two or three years. 

This unnecessary destruction can be prevented by 
combining modern techniques with traditional 
practices so that the same plot of Lind can be used to 
produce crops over and over again. 

ln La Pbnada, Colombia, our experimental (arm 
demonstrates how these techniques can be used to 
grow a family's food on a small four hectare plot. 
(Instead of clearing the usual ten hectares of forest.) 

WWF fieldworkers are now involved in over 100 
tropica] forest projects in 45 countries around the world. 

The idea behind all of this work is thar the use of 
natural resources should be sustainable. 

WWF is calling for the rate of deforestation in the 
tropics to be halved by 1995, and for there to be no 
net deforestation by the end of the century. 

Write to the Membership Officer at the address 
below to find out how you can help us ensure that 
this generation does not continue to steal nature's 
capital from the next. It could be with a donation, 
or, appropriately enough, a legacy. 

WWF Wxld Wide Fund For Nature 

(Formerly World VikUr Fundi 

International Secretariat, 1196 Gland, Switzerland. 


FOR THE SAKE OF THE CHILDREN 

WE GAVE THEM A NURSERY. 



:oiiun 










CONFERENCES & EXHIBITIONS 


MAY 13 

INVESTING 
IN CHINA SEMINAR 

Investment eppenunitira and tax pfennin g 
ooosnkraiioas for companies expanding 
into the PRC 
Price £80 pins VAT 
Contact: Michelle Beard, Bros & Young 
Teb 071-931 7297 Fax: 071 242 5863 

LONDON 

MAY 17-18 
HARLER HALEY 
ROADSHOW AND SEMINAR 

Capiul Most Horae. 

CfenniatoG Road, Etfinbtngh 
Fea t uri ng a aetoa k re of ponaMc <fopl«y*. 
new exhibition eysiems and dieplmy 
accessories. Sec die latest 'tec hn olog y in 
display design. Discus your exhibition 
needs. FREE admission. 9am - 6pm. "A 
Guide to Bette pykthWn g Seminar* mm 
coocnmaliy. Oort £49.95. 

Enquiries: Louise Bodgsoo-Jonea, 

Matter Haley ExpoSys tens 
Teh 0480 218588 JRnc 47OTC 

EDINBURGH 

MAY' 18 ~ 

SHARE PLANS WORKSHOP 

An opportunity to review and dbcuss all 
issues surrounding the renewal of IK 
approved share optica schemes, rnrh i ding 
performance criteria and alternative 
a »i^ i g- m nve Other topics am riFomplnycc 
daw wiiwrM and the operation of trusts. 
Coofcua: David Atkin*. Monks Partnership 
Tldt 037)830959 

STANSTHP 

MAY IB 

ZWBABWE-1HENEW 
ECONOMIC ERA 

CH Cbofcreoce, sponsored by Bascriys and 
BAT, considers trade and investment* 
prospects wiih Oparins address by Michael 
Head tine. Keynote address by President 
ibyi 

. Pnogra 

ng-tenten, industry etc. 
Contact: Nicobi Martin. CB1 Conferences 
Tel: 071 379 7400 Parc 071 497 3646 

LONDON 

MAY 20 “ 

WORLD CLASS 
INTER NATIONAL 
WORKSHOPS: 

PROCESS RE-ENGINEERING AND 
WORKFLOW AUTOMATION. 

The Organisation flat aspires to World 
Class performance will deliver hi 
products and service through a serin of 
value-adding processes. This workshop 
looks at how to make the best nac of the 
leading workflow automation prod net. 
Staff ware, la radically improve process 
cffcctivctt».{R£& WCM4S1 
Contact: Vidd Wriham 
World CJass bteaatiOtel Ltd 
Tet 0705 268133 Fac 0705 268160 
LONDON 

MAY 20 

WORLD CLASS NTH^NATIONAL 
WORKSHOPS: 

BUSINESS PROCESS MANAGEMENT 
Organisations achieve ihribr goals through 
■ relatively area 1 ! number of processes. 
This workshop explores how to create 
value adding processes and the role of 
workflow ■oKMttttet and activity Imaed 
rating (Ref: WCM4) 
fWrrt- vkfci Wribam 
Wodd Oa« Intanaflonal Limited 
Tel: 0705 268133 Ftec 0705 268160 

HAMPSHIRE 


MAY 24 

INSURANCE PREMIUM 
TAX CONFERENCE 

M^for coofezmoc an impDcsrion of LPT. 
featuring representatives Bom HM 
Customs & Excise. 

FrioK £80 pins VAT 
Gntecc Michelle Besrd. Ernst A Young 
T\sL" 071 931 2297 Fnc 071 242 5862 
LONDON 


MAY 24-25 

PRACTICAL DEAUNG 
COURSE 
- Arraign exchange 

Training in Spot ind Forward forex 
dealing for trainec/jnnior dealers tod 
Corporate ire as Dry personnel. Highly 
puniripatjvc comae bdn&g WIND2AL 
(PC Windows-based dealing trinateocw). 
Training effected by practitioners with 
many years* marital c s ps iieuec- 
£480 + VAT 

Lywood David Intern ati onal Ltd. 

Tfcfc 0959565820 Fine 0959 565821 
LONDON 


MAY 24-26 

HA/FOA GLOBAL BNVESneyrr 
& RISK MANAGEMENT 
OFTOfmJNTlES FOR NSTTIUTTONSa 
FUND MANAGERS 
LEMEHIDiEN HOTEL 
renriou funds, corporate a re na te a , trader s , 
product address anting ftmues for 

risk Bimaetan e n L Keynote speakers: Brian 
Quinn. Bank of Eneknd; Gordon Binu. 
GeoaaLMoton Penfloa Fteud. 

Cbntaet: US laHs Greenway m46fr5460 
UK Caroline Jones 071 4884610 

LONDON 


MAY 24-28 

RALTECH 

The Railway Technology Event for nyakans 
tad ccmp w s. RiahaA wffl ftewt ca the 
l edmn l oCT being developed and applied In 
the railway component supply industry 
I nm i m lnmdl j The BrliBi i t in r i ^ a r . « w ua the 
HmI opponmriiy fin wte wi to meet 
senior engiueett and s pec ifi en and wBI be 
stffKHled by a Qmgrera of mcraOseuraHx. 
Oontact: Roger Wcat- Centre Eiddxtxu 
Tel: 021 767 2683 

BIRMINGHAM 


MAY 26 

BUSINESS PROHTABILITY 
THROUGH IT 

msirigtfit boa HP RMt "wr aod Sun 
Alliance inttrnarioaal tkacribe projects to 
aoease business profitability, using IT to 
Identify moot profitable business 
line*/ customers and comm uni cate 
cffaahrdy with saka pcuomcL For details 
conns Vendor Inriqprinrimt Software Users 

TWL0W8377445 Pax: 0906 377470 

LONDON 


MAY 26 

HOW TO KEEP YOUR CASH 
FLOWING 

Many btetiiimsea suffer the cficcta of late 
payment and had debt as they regard 
credit l rnumunimi n as a low priority. This 
conference, in association aritb Trade 
Indemnity, will address Issues such as - 
bow can credit management be a key 
dotUribotor to business peribnmace7 
Directa Conferences 07 1730 0022 

LONDON 


MAY 26 

WINNING TOMORROWS 
CUSTOMERS 

C8I/MQA Conference, considers bow 
companies use marketing quality tftaripiin es 
to adapt successfully to the changing 
marketplace and enhanced customer 
expectations. Speakers include leading 
sishorities tarn The Htaey Crime. Mori and 
QanflcM School of Man ag anwn 
Contact Georgia Kingaby. CBf Conferences 
Tst 071 379 7400 Fuc 071 497 3646 
LONDON 

JUNE 2 

DEVELOPING NEW PRODUCTS 
FOR GLOBAL MARKETS: THE 
OPPORTUNITIES 
A national one-day coofcrcnce organised 
by the Design Museum in conjunction 
with the DTI, which will tackle the 
fundamental issues of new product 
development and its impact on 
profitability and competitiveness. 

Contact: Conference Secretariat, Northern 

Conference Bureau 

Tet 0625 5D2600 Fta 0625 502900 

BIRMINGHAM 

JUNES 

MANAGING ABSENTEBSM 
IN SICKNESS AND IN HEALTH 
CBi conference uses 1994 CBI/PERCOM 
Survey and case studies from public, 
private, "*wi.hrtm ing inri service w nK 
to consider patterns nd causes of 
absenteeism and establishment of 
effective control proced ur e s . 
rww Georg ina Khtgiby, fw Oxfiiencct 
Tet 071 3797400 Fax: 071 497 3646 

LONDON 

JUNE 3 

ENVIRONMENTAL 
MANAGEMENT SYSTEMS - 
IMPLEMENTING EXPERIENCE & 
LEGAL LIABILITY IMPLICATIONS 
Chaired by John Stambo I Ionian, 
Department of the Environment. 
Environmental Protection & Industry 
DivisioiL Speakers final Setoo Healthcare, 
Masons, Natweit, ISO Drafting 
Committee, Nabarro Naihanson, LEA. 
Transport Development Gronp and 

Cameron Maritby Hewitt. B av iM iuu ien lil 
software systema thspUy. 

Pax Pamela SHmcD. Indonty A 
EnvironatteU Aaaociilcs for brodane on: 
081 876 1674 (Tel: 081 876 3367) 

LONDON 


JUNE 3 

INTRODUCTORY COURSES 

TOTEE FUTURES & OPTIONS MARKETS 
As the futures and options indnatry expand] 
moo executives from the general finsnaal/ 
t ywngw njmmnmty need to gam a thorough 
grounding in the operations of the 
interna QOQal otetXW. Full brochure contact: 
Rory Brown, fatara & Options Wcrid 
Tet 071 8279977 Fax; 081 3378943 

LONDON 

JUNE 6 - 7 

HNANOAL REPORTING IN 
FRANCE AND GERMANY 

Find out about the major areas of 
differences in European accounting 
practices a! avoid tfao thinaipniiig 

tboac unaware of these differences. 
Contact; Evasna Morris, CIMA 
Maateroourec* Tdcphonc 071 91765® 
Fbc 071 580 6991 

LONDON 


JUNE 6 & 7 
FT WORLD GOLD 
CONFERENCE 

Thia important conference, which has 
been timed in coincide with the 
leroenicnary eT | rb n fff n| " or Ihe Bank of 
England, will feature central bank 
presentations, a review of international 
nriniag d e v el opments and a major forum 
on the role of the markets in Ihe mid- 
1990s. Enquiries: Financial Times 
Tel: 081-673 9000 FUc 081-673 1335 
LONDON 

JUNE 7-8 

PRACTICAL DEAUNG 
COURSE 

- Mono; Marion 

T raini ng in traditional Caih Mntds and 
short term derivatives dealing - risk 
identification and evaluation, product 
pricing position management - 
oppommirice. to test theories leant in 
ffaili^g rinm hii iM «wi practical exercises. 
For Corporate treasury personnel and 
bonk dealers. £480 + VAT Lywond 
David Inii riTBitimMl ud. Tel: 0959 566820 
Fax: 0959 565821 . 

LONDON 

JUNE 7-0 
BpR: BUSINESS 
TRANSFORMATION AND fT: 
MANAGING CHANGE 
Presentations by: John Sifonis, Siberg 
Associates Inn, New York; WOT Eaton, 
OASIS Group pic; Michael Mainelli, 
BDO Ctwsuitiag; Coim Gnuknii -'T lwvmis , 
Adaptation Ltd; Graham Gould. COBA- 
M.LD^ Richard Archer, HMSO; Peter 
Haioe, Savant Associates; Joe Pcppard. 
Crasfield School of Ma n a g e m ent; Brian 
TWiu, Technology Management and 
Forecasting: Mark Goodridge, ER 
Cons u tana. Gnmacc UNICOM Semfems, 
0895 256484 fax 0895 813095 

LONDON 

JUNE 7-0 
BPR: BUSINESS 
TRANSFORMATION AND IT: 
MANAGING CHANGE 
improving BusiDCtt Performance Through 
Effective Use of I.T. 3 day conference 
covering The Hallmarks of Successful 
Organisations; Bp$reess Issue* in (be 90’s; 
Bosibcbs Tratutfonnation and IT, The Rote 
of BPR; Managing Change: the ultimate 
key to success. 

Contact: UNICOM Seminars, 

0895 256484 fax 0885 81 3095 

LONDON 

JUNE 8 

BUSINESS PERFORMANCE 
MEASUREMENT: Dre 
Instruments of Corponta Change 
A half-day seminar for senior execuives 
wishing to explore the femes involved in 
developing and introducing new 
performance measurement and reporting 
concepts. Featuring David P Norton. 
President R enakiancr Strategy Group, co- 
fonnder and former President of Nolan 
Norton A Co. Coated: Bremen (ntrihgeoee 
Tet 081-544 1830 Fbc 081-5449020 

LONDON 

JUNEB-S 

§jh3V server reporting 
FOR THE ENTERPRISE 
Emopcb lewfog conference and exhfoiliM 

on Ftwrrtw xiyt m'lt lufonnadoo 

System. A unique conference pro g ram me 
which gathers many of the world's best 
Ihmkca. piachlHiocrt aod tax stnthea, with 
the aim of hriping mgsni'aitiinm tint T3S to 
business goals. Contact: Business 
hnetfigenee TeL- 081 544 1830 Fte 081 

544 9020 LONDON 


JUNE 9-10 

BUSfflESS PROCESS RE- 
ENGINEERING SEMINARS A 
WORKSHOPS 
Condoning a nccrehl series of 
forctccorivcs md senior managers charged 
with designing and implementing BPR 
mWati wBL Esiabfished blue phip cheat Bsl 
P reseated by a leading US pra ct iti oner , our 
guide is ill rat rated with case studies and 
workshopa. Course book available. 
Repealed September 19-20. Contact; 
Richard Partis. Vertical Systems Intercede 
Ud Tel: 1-44-455-250266 (24 hours) 
Fax: +44-455-890821 

LONDON 


JUNE ID 

TIME MANAGEMENT 

Ad exuemety practical scznuuif, lymiuMi to 
twenty ri e fe g sra . for anyone who does not 
have enough time in the day. Find out 
bow m prioritise aod evaluate your time in 
order to make ma xi mum effective use of 
h. 

Contact; Evanna Morris, CIMA 
Masagranucra Telephone 071 917 6588 
Fax: 071 580 6991 

LONDON 


JUNE 13 & 14 

FT NORTH SEA OIL AND GAS 

The conference will review exploration 
and production in the main sectors of the 
North Sea and consider the Impact of 
current oil prices on activity in the 
province. Expert speakers will also 
address snch crucial issues as 
com peti tivencas and ways of reducing 
costs; operator-contractor relationships 
md abandonment. 

Enquiries: Ftnanai! Tbdcs 

TU: 081-673 9000 Fax:081-673 1335 

LONDON 


JUNE 14 

MANAGEMENT BUY-OUTS 

Management buy-outs ate established and 
well recognised transact ions. The 
comprehensive programme of this 
e n tifo yen ff. in raodadon widi Omthm 
Trust, will provide so in-depth 
enmftatfon of MBOs. The emphasis will 
be on practical advice with case studies 
from directors who have led saccessfal 
management buy-outs. 

Director Conferences 071 7300022 

LONDON 


JUNE 19-23 

EDP AUDITORS ASSOCIATION 
22ND INTERNATIONAL 
CONFERENCE 

Mqot conference on information systems 
auditing, tea luring over SO educational 


Price: £795 plus VAT fEDPAA membeai 
£895 plat VAT (non-membera) 
Contact: Jack! Butler, ItMiunc of Physics 
Teh 071-235 61 11 Ftec 071-259 6002 

LONDON 


JUNE 21 

INDiRECTTAX- 
AN INTEGRATED APPROACH 
Co nfer ence on UK indirect tax 

systems end implications to business, 
featuring specialist tut planning 
worfaritope. 

Price: £100 {An VAT 
Gntecc MiriwHp Beard, Erast A Young 
Teh 071 931 2297 Phx; 071 2425862 
LONDON 


JUNE 21 

UNDERSTANDING THE HEDGE 
FUND RISKS 

Hiis high-level seminar will assess the 
danget* posed by hedge funds to banks and 
other financial counterparties. Topics to be 
covered indude: Hedge fund structures and 
their performance: evaluating hedge hinds 
as counterparties; and aspects of risk 
management in hedge fends. 

Gamas Alison Hgst. Dow Jones Tderaie 
Td: 071 8329532 Fax: 071 353 2791 
LONDON 

JUNE 21 A 22 

INCREASING BUSINESS BY 
TELEPHONE 

June 21 - Incoming Cali. June 22 - 
Outgoing Call- Dealing with incoming 
enquiries or proactive sales call, delegates 
learn bow to maximise the potential of 
every call. 1195 -t- VAT per day folly 
inclusive. Book both days together for 
same delegate for £50 redu ct ion - £340 + 
VAT. 

Contact: Structured Training 0926 3.17621 

LONDON 

JUNE 21 -22 

TOWARDS POST OFFICE 
PRIVATISATION OR 
COMMERCIALISATION? 

Major conference assessing options open 
to the British Government as it is poked 
to make its decision oa The Pan Office. 
Outstanding opportunity la hear key 
European speakers and to learn of 
different privatisation methods. 

Contact: Westm i nster and City 

P rogra mm e*, lane While 

Tsh 071 582 0516 Fax: U71 5S2 7245 

LONDON 

JUNE 23 

TOTAL INNOVATION 
MANAGEMENT: IDEAS INTO 
ACTION FOR IMPROVED 
PERFORMANCE A PROFITABILITY 
Innovation matters. Directors know litis. 
The question is how to engineer your 
or gan imiti i*i for the appropriate levels or 
itmavaiioa. This conference, chaired by 
Robert Heller is organised by The 
Strategic Planning Society. 

Contact: Jo Mainee. The Strategic 
Planning Society TeL 071 636 7737 

LONDON 

JUNE 27 -AUGUST 5 
THE LONDON SCHOOL OF 
ECONOMICS 

is offering intensive, acaderaicaliy- 
challenging, examined and certificated 
programmes In the following subject 
areas: Management, Accounting and 
Finance. i<b***mivuI Studies, Phiknophy 
aod Criminology. The courses, arranged 
in two, three week sessions, auraci an 
intcraaiioaal audience, from professional, 
business and student commuiuiies. 

Contact: Nieota Meafcm, 

Tel: 071 -955 7SJJ Fix: 071-9SS 7675 

LONDON 

JUNE 28 

INTERNATIONAL WHEAT 
COUNCIL. WORLD GRAIN 
CONFERENCE 1984 
Speakers from major grain importing and 
exporting countries will explore policy 
adjustments in the posMJiugnay Round 
trading environment. Prominent traders 
tufli examine challenges bong the mining, 
ud industries. 

Contact Inieraatioaal Whew Council 
TeL- 071-513 1122 Fix: 071-712 0071 

LONDON 


JULY 6-8 

CONFERENCE ON HUMAN & 
ORGANIZATIONAL ASPECTS 
OF MANUFACTURING 

Topics include: managing change; lean 
production; implementing concurrent 
engineering: design of manufacturing 
systems; and many more. Fee £399 
(includes VAT. lunches, coffee breaks, 
conference dinner and pro ceedings ). 
Contact: Paul Kidd. Phone: 0625 619313; 
Fax: 0625 619060 

MANCHESTER 

JULY 12 

PART TIME WORKERS - 
FULLTIME PROBLEMS 
This conference focuses on problems 
facing employers seeking bo expand their 
pan time workforce. It offers practical 
advice on and solutions for i mp l em e ntin g 
a part lime workers strategy and for 
maximising the efficiency of a part time 
workforce. 

Fur further inTonnatku 

Tel: 081 445 8623 Fax: 081 446 2051 

LONDON 

JULY 14 

EC COMPETITION LAW 
This oik day workshop will analyte the 
basic principles of Article 85 (anti 
competitive agreements) and article 86 
(abuse of market power) and intellectual 
property rights interspersed with practical 
workshop sessions on distribution 
agreements and palest licences. 

For further information 

Tel: 081 445 8623 Fax: 081 446 2051 

LONDON 

JULY 18 -AUGUST 5 
HIEmATONALBUSMESSAND 
■RE ENVBONMBTC POLICY 
CONTEXT AMD POUCY TOOLS 
London School of Economics is offering a 
three week, intensive, degree-level, 
examined coarse. Topics include 
environmental politics, sustainable 
development, the European debate, trade 
aed the environment. Transnational 
corporations, 'green' taxes and subsidies, 
corn- benefit analysis and discounting, 

I smtf UfcBtS. 

Contact; Nicola Meakiu 
Tet 071 955 7533 Rue 071 955 7675 

LONDON 


EXHIBITIONS 


JUNE 7-9 

ROSPA SAFETY & HEALTH 
EXHIBITION & CONGRESS 

Europe's largest annual Safety & Health 
Exhibition, now in iu !2lb successful 
year. Will provide vital information on 
health and safety legislation as well as 
products and services which wff] enable 
companies to operate in b safe and healthy 

Exhibition Enquiries; Hazel Kirby - 
Exhibition Manager, Centre Exhibitions 
Teh 021 767 2665 

BIRMINGHAM 

JUNE 16-17 

EUROPEAN DERIVATIVES 
EXHIBITION 

Derivatives exchanges from USA, 
Australia. Pacific Rim and Caatinema] 
Europe join brokerage companies, system 
suppliers and clearing firms at Europe's 
premier event for the derivative* industry. 
Associated seminar programme. 

FREE tickets contact: Rory Brown, 
Futures & Options World 
TeL' 071 827 9977 Fax; 081 337 8943 
LONDON 


MAY 17 -19 

MTQ "94 

TESTING FOR QUALITY 

The leading materials testing exhibition 
and conference opens in Hall 12 at the 
NEC on 17th May with over 250 key 
exhibitors. Entrance, parking aed 
catalogpc are free. 

Ticket Hotline No: 021 767 3560 

Enquiries: Fran Foster - 

Centre Exhibitions Teb 021 767 2413 

BIRMINGHAM 


INTERNATIONAL 


MAY 17 -19 

POWER-GEN EUROPE "94 

Largest conference and exhibition on 
electricity generating in Europe. New 
developments in maihei regulations & 
structures, utility & I PR interaction, 
cooperation, project financing and latest 
technologies. Over 160 presentations 
selected by the European power industry. 
Most major European utilities and 
companies active in power generation 


a: PennWcil C&E 
Tel: 31-30-650. 963 Fax: 31-30-650.915 
COLOGNE 

MAY IB-19 

EUROPEAN TV PR0GRAHIMG 

2000 

Hotel Royal Monceau - Paris 
This dynamic conference will cover the 
interlace of programmers and sponsors, 
prodnetion finance and advertising. 
Broadcasters, producers, sponsors, 
advertisers, distributors, and financiers 
will meet for two days of debate on the 
future of lelcvtsxm programming 
Contact: Patricia Bayntoo. 

Kagan World Media Limited. 

Ter 07! 371 8880 Fix: 071 371 87l5fo 
PARIS 

MAY 26-27 

THE 7TH EAST-WEST 
TAX CONFERENCE 

This conference focuses on the changes 
impacting on East-West taxation and 
investment. Will cover: the tax 
implications of specific economic 
activities including shipping, leasing and 
licensing; investment liberalization and 
lax reforms; practical VAT tunes and 
Duty developments. 

Coated IBFD International 
Tax Academy, Ms Anselien School, 

Teh +31 -206267726, Fax: +31-2062D9397 

SOFIA 

MAY31~JUNE3 

COMMUMCAStA94EXHBmON& 

CONFERENCE 

Meet 500+ international exhibitors at 
Common icAsia/NetworV Asia/Mobile 
CammAsia. Listen to 55 distinguished 
tpwifcw miring about tbdr experiences and 
predictions rot the fouire of Asian 
communications. Equipment services, 
flian c in ft regulation -what will be reeded to 
lake Asia in to ihe 21at century 1 ? 

London Tet 444(0)7] 486 1951 
Rat 444 (0171 413 8211 
Singapore Tel: +65 338 4747 
Fam +65 339 5651 

SINGAPORE 

JUNE 13-14 

THE EUROPEAN FOODS DR84K 
INDUSTRY CONFERENCE 

Manufacturers and distributors are being 
squeezed as prices and margins are forced 
downwawfe. This conference present! actions 
and solutions; how to strike a balance 
between industry constraints and future 
biu incss development. Contact: Louise 
Thcanas Management Centre Eraopc. Bnseeb 
Tel: *32 3 516 1911 Rno +32 2 513 71 08 
BRUSSELS 


TO ADVERTISE IN THIS SECTION PLEASE CALL JANET KELLOCK ON 071-873 3503 








FINANCIAL TIMES SURVEY 


BIOTECHNOLOGY 


A long and arduous 
Journey to success 

While raising cash to support science is tricky, the 
profits to be gained from developing a top drug 
remain a strong magnet, writes Daniel Green 


S tephen Peroutka is 
happy, excited and per- 
haps just a little ner- 
vous. Aged 40, he has just 
given up a senior job at one of 
the world's most successful 
biotechnology companies, 
Genentech. He now employs a 
staff of nine in a spartan office 
by California’s interstate-101 
freeway about 25 miles south 
of San Francisco. 

He is embarking on a jour- 
ney that th Q»sg"ris of other 
eutrepreneurially-zninded sci- 
entists have made before him. 
He has started a company. 
Spectra Biomedical, that plans 
to discover how a disease 
works. Once the disease Is 
understood, a team of scien- 
tists he has yet to recruit will 
And a way to treat it. A devel- 
opment team will take the 
treatment through several 
years of clinical trials to the 
doors of the Food and Drug 
Administration in Washington 
and its equivalents around the 
world. Finally, marketing and 
sales executives will put the 
newly approved treatment in 
front of doctors who (it is 
hoped) will be impressed 
enough to authorise its pur- 
chase by the truckload. 

Mr Peroutka will become a 
saviour to thousands of 
afflicted people, a mil Bonaire - 
possibly a billionaire - a Nobel 
prize winner and revered elder 
statesman of the world's 
healthcare industries. 

Perhaps the most extraordi- 
nary aspect of the biotechnol- 
ogy business is that people 
believe in the possibility of 
successes such as this, and 
back their beliefs with cash. 
There are now more than 1,400 
biotechnology companies 
around the world, half of 
which are in the US. More than 
250 have achieved stock mar- 
ket quotations. Only five or six 
matB an operating pr ofit 
One certainty is that Mr Fer- 
outka's story will be different 
scientifically from those that 


have gone before. 

A decade ago, the drug inter- 
feron was haded as a cure-alL 
It has turned out to have only 
limited use in cancer therapy. 
By the end of the 1380s pro- 
tens were all the rage. The 
idea was to malm something 
that is already present in the 
body and avoid ail the difficul- 
ties of side effects. Today, pro- 
teins are regarded as difficult 
to make, unstable and tricky to 
use because they have to be 
injected rather than swal- 
lowed. 

The latest fashion is in 

■Storton.." 


’Annul Mas.. 
- d owattwn 
• USSIfaMon 

r*» 



C- , A . ■ 

“small molecules” — essentially 
the b usi n ess end of a protein. 
With all the unnecessary parts 
discarded, a small molecule 
can mimic the action of a pro- 
tein «"<i is cheap as well as 
easy to store and admin . 

ister. 

But while science moves 
q uickly , the business of raising 
the money to support it 
remains gruelling. Mr Per- 
outka has got off to a good 
start by securing the personal 
backing of one of the doyens of 
California venture capital, 
Eugene Kleiner, a man behind 
many of the electronics and 
computer industry start-ups of 
the 1960s and 1970s. 

Mr Peroutka’s team is 
already working to find the 


genetic basis of migraine. He 
has attracted attention from 
potential corporate partners in 
the US and in Europe. Soon he 
will do deals with venture capi- 
talists. pharmaceuticals com- 
panies mid Wall Street 

Three thousand miles away, 
in Cambridge Massachusetts, 
Alison Taunton-Rigby, an 
expatriate Briton, is well into 
the second round of venture 
capital financing for her com- 
pany Mitotix. 

Her company has been 
recruiting fast searching for 
the cell scientists which, it 
wants in order to develop can- 
cer treatments. It has taken 
advantage of the restructuring 
of the pha rTTMMqiti w>i«i indus- 
try. With job security no lon- 
ger guaranteed, a biotechnol- 
ogy company promises growth 
rather than contraction. 

Yet times are tough for a 
small biotechnology company. 
Mitotix has 40 employees and 
its few dollars of venture capi- 
tal are beginning to look small. 
Wall Street is unenthusiastic 
about the whole healthcare 
industry so Mitotix Is looking 
for corporate partners. 

“We approached nine Japa- 
nese companies of which four 
to five have expressed interest 
and that has been narrowed 
down to three companies," 
says Ms Taunton-Rigby. Tallis 
are still going on. 

One day, Mitotix may find 
itself in the position of a com- 
pany such as British Biotech- 
nology. With 300 employees 
and an asthma collaboration 
with. Europe’s biggest drugs 
company Glaxo, it has just 
completed a financing round 
that raised more than £90m 
over two years. 

Or it could go the way of 
fellow Massach usetts company 
Vertex which has used a string 
of corporate deals as the basis 
for building cash reserves of 
8104m, almost 91m for each of 
its 115 employees. 

The company has a contract 


in Aids research with UK 
drugs company, Wefinome, in 
which Vertex believes it drove 
a hard bargain because It had 
both the expertise - in an area 
called proteases - and a strong 
financial position. "Wellcome 

had to do thg deal," nrplafng 
Joshua Boger, company presi- 
dent. "We took advantage of 
that. Merck [the biggest US 
drugs company] and others 
were already into proteases." 

Vertex’s financial strength 
brings it more than farther 
cash. "We are especially 
pleased with the non-cash 
resources that have been put 

into these deals," he says. "In 
WeUcome's case the details 
have not been released, but 
French company Roussel put 
in more 30 srig nU at s in 
Paris and Swindon.” Mr Boger 
makes little attempt to hide his 
am bition to become a global 
force in the healthcare indus- 
try. 

Back in California, Chiron 
Corporation has almost done 
so. Last year it saw the 
approval of multiple sclerosis 
treatment Betaseron, which it 
now makes for Sobering of 
Germany to mu ft has nads 
profits for five quarters In a 
row and promises more thanks 
to joint ventures with Swiss 
company Ciba to develop Aids 
and herpes vaccines and 
licence deals in other areas 
with Germany’s Bayer and 
Johnson & Johnson erf the US. 

C hiron remains a bio- 
technology company in 
technological Tn 

financial and management 
terms. It is practically a drags 
company. Edward Penhoet, 
chief executive, has 2,250 
employees and deals with the 
problems that face ordinary 
companies. "When we get too 
big we divide it to try to keep 
the small company culture. We 
keep the management struc- 
ture flat Our target is five lay- 
ers and we get dose to it," he 
says, sounding like a career 
general manager. 

But Mr Penhoet is not so dif- 
ferent from Mr Peroutka. He 
gave up security as a tenured 
professor at Berkeley just over 
a decade ago. He moved three 
miles south from one of the 
US's most prestigious academic 
institutions to offices in dis- 
used doc ky ards across the Bay 
Bridge from San Francisco. 

In the 13 years since he and 
two colleagues started Chiron, 
Mr Penhoet has seen many 


'DREAMING 



"Ten years from now, this will bd - 
a city” 

"You're dreaming ” 

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We have made our dreams ieafitks.- . 
Wfe have looked at sand and seen. dries. 
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gardens. "... 

We have created, oht of the grain of;'-..* 
an idea, a workl-class petrochemical , - 
company A company that u ses Saudi 
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natural resources. A company that ; , 

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minion metric tons of different quality • 

petrochemicals and plastic resins , v 
around the world. 

Ws are one of the world’s leading . . 
producers of MTBE, one of the 
few petrochemical companies to 
manufacture aD five of the most 
widely used thermoplastic resins and, 
thanks to woric at our Research and •- 
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of technology. 

We have dreamed. We have achieved. 
And we continue to plan for the future 



For tbe long-term 

SABIC Europe Ltd. 

Kensington Centre 
66 Hammersmith Road 
London W14 8YT 

England 

Telephone (44-71) 371-4488 
Telex 2341 1 SABMRK G 
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rivals fell Chiron itself took 
over Cetus in 199L Last year 
saw the spectacular failure at 
late stages of development erf 
sepsis drugs made by estab- 
lished stock market quoted 
companies Xoma, Centocor 
and Synergen. 

Both in spite of and because 
of such failures, the life cycle 
of a biotechnology company 
embodies the US way of doing 


business. Sheer belief can 

malm thing s happen; SUCCeSS 

attracts success. 

Investment draws in talented 
people who get things done 
and attracts further finance. 
Waves of investors get in and 
then sell out at a higher price 
to the next wave. Many down 
the line will find they have 
bought worthless paper. The 
idea that seduced them failed. 


The scientists move on, the 
entrepreneur starts another 
company, the next scientific 
fashion is in vogue. 

But the ultimate goal is no 
longer a dream for southern 
California’s Amgen. Fourteen 
years old and with 3,100 
employees, it already has one 
product - blood treatment Epo- 
gen - which is among the 
world’s fop five selling drugs. 


By the end of the decade it will 
have two in the top live and 
Epogen will have displaced 
Giaxo’s ulcer treatment Zantac 
at number one, according to 
forecasts from analysts at 
stockbroker Lehman Brothers. 

Amgen stands at the top of 
the biotechnology pyramid, 
like many before trim, Stephen 
Peroutka has begun his climb. 
He will not be the last 


Local facilities and regulations are important, says Victoria Griffith 

Location a high priority 


For such a young sapling of an indnstry, 
biotechnology has already rooted itself 
firmly in specific locations, and today’s 
thriving centres will probably continue to 
dominate in the future. 

The US holds the lion’s share of the 
business, with more than 1,500 biotech- 
nology companies. Europe, in contrast, 
has less than 250 operations, including 
university research programmes and 
pharmaceutical company subsidiaries. A 
handful of firms also dot Canada, Austra- 
lia and Japan. 

Within countries, too, biotechnology 
tends to duster in specific regions. Tbe 
areas annud San Francisco and Boston 
are the ondispiited capitals of the sector 
in the US. A research corridor also 
extends along the eastern seaboard from 
Rhode Island to North Carolina, and spots 
along the West Coast, including Los 
Angeles, San Diego and Seattle, have 
attracted a number of firms. In Europe, 
Britain Is emerging as the biotechnology 
king, with centres in Oxford, Cambridge, 
Scotland and London. 

Industry executives predict that future 
growth will be focused in these areas. 
"After a while, the business begins to feed 
on itself,” says Kenneth Bate, head of 
sales at the Boston-based group Biogen. 
“Biotechnology firms want to be where 
the other biotechnology firms are. Scien- 
tists like to talk with each other, and 
there's a lot of cross-fertilisation that goes 
on.” 

The attractions which drew the biotech- 
nology sector to these locations will con- 
tinue to act as magnets in the fortune: a 
friendly regulatory s tance, a ccess to capi- 
tal, pr ox im ity to u ni versities and hospi- 
tals, the presence of a skilled labour pool 
and nearby airports and highways. 

Regulatory procedures are the most 
changeable of these factors. Overly 
bureaucratic requirements can put a 
death seal on a developing biotechnology 
centre. Germany’s antagonistic stance 
toward the sector has seriously limited its 
ability to compete as a biotechnology con- 
tender, for instance. Citing ovaly zealous 
regulatory restrictions in Germany, 
Bayer, Boehringer Mannheim and 
Boechst have all established biotechnol- 
ogy operations in the US. 

“ft would take us at least two years to 
get permission to build a lab in Ger- 


many,” says Dieter Bauer, expert on bio- 
technology research and development at 
Hoechst “In the US, we got approval for 
the bnilding in about five weeks, and 
e v e r y th i ng else happened very quickly.” 

Tbe development of biotechnology in 
Britain has also been hurt by regulatory 
restrictions. Companies in the sector com- 
plain that until two years ago, flotation 
requirements . for the London Stock 
Exchange included a five-year track 
record and three years of profits. 

Since the roles changed, life has become 
much easier for UK firms. British Biotech- 
nology floated in mhl-1992 and a number 
of other companies have followed the 
group to market “We negotiated criteria 
more appropriate to a biotechnology 
group,” says Keith McCufiagh, chief exec- 
utive of British Biotechnology. Biotech- 
nology companies usually do not show 
profits for years after titer inception. 

The UK sector now seems ready for 

Biotechnology groups Bke to be 
near their investor bases and 
their market 

growth, and executives hope the new, 
friendlier climate will halt the brain drain 
of British scientists to the US. But many 
believe it will take the country years to 
overcome the damage done by the previ- 
ous regulatory structure. “The environ- 
ment in the UK has changed tremen- 
dously, but we’re still at least eight years 
behind the US in terms of developing a 
biotechnology industry," Mr McCullagh 


Regional and local regulations can also 
make a difference. A few years ago, the 
state government of Massachusetts 
became concerned that a slow permitting 
process was undermining its status as a 
biotechnology mecca. The biotechnology 
company Genzyme was threatening to 
leave the state, and other groups were 
filing similar complaints, fa foe end, Mas- 
sachusetts succeeded in keeping Genzyme 
in tbe state by allocating ombudsmen to 
take biotechnology companies swiftly 
through the regulatory procedures. 

“We wanted a commitment from the 
government to work together with os on 
the permitting and approval process,” 
says Geoffrey Cos; senior vicepresident 


in charge of world operations at Gen- 
zyme. "This is a big Issue and can have an 
enormous financial impact on a firm. If 
it’s your first product, for instance, all foe 
months you’re waiting for approval for a 
plant you're not seUing anything.” 

Massachusetts also sweetened the Gen- 
zyme deal with tax breaks. Indeed, financ- 
ing issues have become crucial tn siting 
decisions. British company CeQtech, for 
example, decided to build a US manufac- 
turing plant in Portsmouth, New Hamp- 
shire, after the state made the group an 
offer its says it could not refuse. “We got 
tremendous financial assistance from the 
state of New Hampshire,” says Peter Fen- 
ner, Cell tech's chief exec u tive officer. “It 
was far more than we could have got in 
Europe, and a better deal than other 
regions in the US were offering.” 

Biotechnology groups also Bke to be 
near their investor bases and titer mar- 
ket, two factors favouring growth in foe 
US. “Most biotechnology groups will have 
to set up branches in foe US at some 
point,” said Mark McDade, chief operat- 
ing officer for Boehringer Mannheim 
Therapeutics. “We set up here because we 
needed to address the needs of the largest 
most profitable pharmaceutical market In 
the world.” 

British Biotechnology says it estab- 
lished a branch in foe US in part because 
it wanted to be near investors. “About 18 
per cent of our shareholders are in the US, 
so it’s good for investor relations for us to 
be hare,” says McCullagh. 

Other factors weigh into companies’ 
decisions about where to locate. Tbe 
availability of a skilled labour pool for 
instance, easy access to air and road 
transportation ami quality of life, which 
helps firms attract the best people, are 
mentioned as important considerations. 

Because these factors are often slow to 
change, industry executives believe a 
growth bias will favour existing centres. 
“Regulatory st r uctures , being near uni- 
versities, all these are Important to mak- 
ing the decision about where to locate, 
probably more important than which 
places are foe cheapest,” says Mr Cox of 
Genzyme. “That's why I think that the 
south-west and north-east of foe US, even 
though they are relatively expensive 
places to do business, will continue to be 
magnets for the biotechnology industry.” 


Debate focuses on how best to develop drugs, says Paul Abrahams 

Accessing the technology 


The conventional wisdom on 
biotechnology - at least the 
one propagated by the biotech- 
nology Industry - is that the 
technology will provide the 
next generation of blockbuster 
drugs. Not aD pharmaceuticals 
groups’ research directors are 
convinced. 

“There is a bright future for 
biotechnology, but not as 
bright as you mi ght think,” 
says Dr Pierre Simon, director 
of Elf Sanofi, the French phar- 
maceuticals group. "IE you look 
at what the industry was 
I promising 10 years ago, it's a 
I long way behind.” 

■ Dr Simon, who says his com- 


pany does not intend any more 
close links with biotech bou- 
tiques, says: “It’s dear that in 
the future some clear progress 
will be made in medicine 
through biotechnology. But 
biotechnology compounds are 
often too big and fragile. The 
drugs developed through bio- 
technology are so huge that 
they often have to be rejected 
- they won't cross tin blood/ 
brain barrier. They have to be 
developed to be injected. The 
most successful compounds are 
once a day oral drugs - with 
these drugs there’s no chance 
of developing them for that" 
In any case, argues Dr 


Simon, the pharmaceuticals 
industry is making rapid prog- 
ress in the field of drug desig n 
and, using computers, can 
screen as many chemicals in a 
day as it used to be able to test 
in a year. 

“Why produce drugs through 
biotechnology, when you can 
make foe compounds through 
classical chemistry?" he asks. 
"For the next few years we will 
try to miinlr the products of 
biotechnology through classi- 
cal chemistry. Through bio- 
technology you can identify a 
receptor, then the nhuraiata mn 
find cheaper, simpler alterna- 
tives to the biotech drug." 


Although Dr Simon’s non- 
conformist views are shared by 
many research chiefe in Japan, 
few in tiie western world sub- 
scribe to his views, at least in 
public. Many disagree. 

Dr William Scott, senior 
vice-president of exploratory 
drug discovery research at 
Bristol-Myers Squibb, explains: 
"The opportunities for making 
better drags are greater than 
ever before. In a short period of 
time most genes in the h >iiwm 
body will be sequenced. Once 
we can identify the molecular 
basis of diseases, then we can 
begin to treat them.” 

Continued on page 2 





I 


£*•?- m. ... 


FINANCIAL TIMES MONDAY MAY 9 1994 


BIOTECHNOLOGY II 






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Raising capital is never easy, says Daniel Green 

Seeking a backer 


ltaW.compaMM''ii^m-rabied'fii»iM in. the- US 


I f- one phrase describes the 
nature erf the biotechnology 
business it is “credibility 
equals capital". 

A decade or so without 
income from sales wiawna that 
the boss’s Job consists of end- 
less rounds of capital raising. 
The chief executive has no 
suitcase of samples and the 
main s ales tool is the scien- 
tists’ creativity and hard work. 

Capital is needed more than 
just to pay the bills. A com- 
pany- with pOpw -in thu hant 
has a strong hand when negoti- 
ating with potential partners 

from the nialuvl nwHTn p jmrmfl- 

ceutfcals industry. “Capital Is a 
strategic asset, not just some- 
thing you intend to spend,” 
says Joshua Boger, president 
of Massachusetts company 
Vertex. 

Yet It Is hard to imagine a 
more ignorant group of inves- 
tors than typical fund manag- 
ers. Nobel prize-winning sci- 
ence must be sold to people 
who are accustomed to eval- 
uating the plans of shopkeep- 
ers and food man ufa cturers. 

And the sales pitch is getting 
tougher. New biotechnology 
companies are launched every 
week. Yet, US biotechnology 
companies managed to raise 
only $2J8m in 1993, down from 
$3.4bn in 1991 and only a slight 
Improvement on the &2.5bn 
raised in 1992, according to 
research from biotechnology 
consultancy Feinsteln and 
Partners. 

The increasing difficulty in 

f rpnuTatfwg r myRh ilify tnfn cap. 

Ital is seen in the average 
amount raised on flotation: 
$22m in 1993, compared with 
$26m in 1992 and $33m in 1991. 

One biotechnology company 
chief speaks of i99l’s "water- 
fall of money. You just held 
out your cup and it was full”. 

Today, the tables have 
turned. "There’s more great 
science Bum access to capital,” 
says Harvey Berger, chairman 
of Ariad Pharmaceuticals of 
Cambridge, MnssarJiwffpHs. 

Steve Burrill of San Fran- 
cisco merchant bank Burrill 
and Craves says that the US 
biotechnology industry alone 
will demand $5bn in 1994 in 
further investment. It is 
unlikely to get it 
Wall Street might not under- 
stand science, but it does 
understand that the industry 


rarely provides a return on its 
investment. 

One of the ffwfa r easo ns that 
Wall Street has beat prepared 
to fund the mysterious biotech- 
nology industry is that it has 

thought it might be investing 
in a product so innovative it 
might be a monopoly. But 
healthcare reforms around, the 
world threaten to prevent the 
charging of monopoly prices. 

"Healthcare reforms scare off 
Wall Street," says Alison Taun- 
ton-Rigby, chief executive of 
start up Boston- biotechnology 
company Ifitotix. "Especially 
the thought, of price caps on 
drugs.” 

• So the merchant bankers’ 
minds have turned to ever 


‘It's not very creative to 
sen stock at a discount. 
SeO it ata premium, 
thafs creative’ 


more innovative financial 
instruments, many designed to 
appeal to those who would not 
normally invest in the sector. 

‘ Last month .saw a successful 
ruTi r«n ft wn RriHah Biotech- 
nology using effectively a 
deferred rights issue. Half the 
money Is to be put up now, the 
other half in two years time 
when investors have had a 
chance to see the results of 
work in progress. 

In the US there have been 
even more cr e a t i v e ideas put 
into action, including off-bal- 
ance shjw* - firomriny and spin- 
offs of subsidiaries. 


One of the most widely 
employed is the Pipe - a pri- 
vate investment in public 
equity - in which a block of 
shares is placed privately at a 
discount to the market price. 
Pipes accounted tor more than 
$500m in 1993’s biotechnology 
fUnd raising, according to Feta- 
stein and Partners. 

Nevertheless Pipes arouse 
controversy in the industry. 
For Mr Burrill, the private Pla- 
cing avoids the problem of the 
share price being depressed by 
market knowledge that a large 
block of shares is on. offer. 
"You might offer the shares 
privately at a 15 per cent dis- 
count to the market price, but 
if you offered them openly, the 
S fty»k might fall 30 per cent.” 

But one embittered biotech- 
nology chief executive says: 
“It’s not very creative to sell 
stock at a discount Sell it at a 
premium, that’s creative.” 

So the search continues for 
fjwonrfai innovation suited to 
the industry. Aberiyn Capital 
Management, a US subsidiary 
of Dutch merchant hank Mees 
Pierson, part of the Nether- 
lands’ largest bank, ABN- 
Amro, lends money to biotech- 
nology companies using their 
equipment and patents as col- 
late raL "We are not taken 
by the dismal shapa of 
the balance sheet,” says Aber- 
iyn president David Sakura. 

“Leasing on a patent as col- 
lateral can be done because 
patents are carried on the 
hoofrg at the cost of filing , in 
many cases, the technology 
remains sound even if the com- 
pany gets into trouble. Inves- 




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tors lose sight of this." 

Another fund raising idea 
comes from Drug Royalty Cor- 
poration, a quoted Canadian 
company, which invests j***h 
in return for a slice of the roy- 
alty stream of a product 

Alan Grieve, president, 
explains that their policy of 
not taking equity is attractive 
to biotechnology executives 
who have seen their stakes 
diluted as wave after wave of 
conventional investors 
becomes involved. 

Such ideas have yet to make 
inroads into biotechnology 
companies. If Wall Street or 
the City Of are wnahte 

to provide the funds they need, 
they are likely to turn to the 
cash-rich pharmaceuticals 
companies for finance. 

Drugs companies can pro- 
vide research and development 
help as well as cash. But they 


often demand in return mar- 
keting and manufacturing 
rights and a slice of equity. For 
Ms Taunton-Bigby, dregs com- 
panies provide a less than sat- 
isfactory alternative to capital 
markets. "We’ve gone to phar- 
maceuticals companies, but 
given a choice we would not, 
as you give up too much." 

Nevertheless, now is a time 
of investor caution. Even a 
powerful story of scientific and 
management expertise meets 
with scepticism from investors. 

Good science will always 
find backers, runs an adage in 
the sector. Privately, however, 
company executives concede 
that there are huge doses of 
salesmanship and hick to be 
added to a successful recipe. 
Credibility win continue to be 
the goal of the biotechnology 
company manager, and it will 
be achieved any way possible. 


Finding routes to 
the new science 




Continued from page 1 
"Biotechnology and a greater 
understanding of the life and 
danth of the cell are opening 
up vast new scientific and 
medical horizons,” says Sir 
Richard Sykes, chief executive 
of Glaxo, Europe’s largest 
drugs group. 

“The basic biology of cellular 
Mechanisms Is becoming more 
and mere understood. That bio- 
logical lmdgr c feinding Is com- 


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tag mainly from outside the 
company, from university col- 
laborations and small biotech- 
nology start-ups.” However, he 
adds: "Me dicinal chemis try 
will still have an important 
role to play 10 years from 
now." 

But in spite of the opportuni- 
ties offered by biotechnology, 
considerable divergences 
remain among- research direc- 
tors and their chief executives 
over how best to access the 
new science. 

A few groups, such as Roche 
of Switzerland and Rhfine-Poul- 
enc Rorer. the Franco- Ameri- 
can company, have acquired 
substantial stakes in biotech- 
nology groups. Roche spent 
$2J.bn in 1990 on a majority 
stake in Genentech, while RPR 
acquired a 37 per cent per cent 
8113m stake last June in 
Applied Immune Systems, to 
gain access to its cell therapy 
technology. 

Most recently Corange 
signed two large deals, acquir- 
ing stakes in Protein Design 
Labs for $206m and CeUPro for 
$220m. Meanwhile, Wellcome 
linked up with Centocor in an 
alliance potentially worth 
8100m, and Smith Kline Bee- 
cham Invested $125m in 
Human Genome Sciences. 

Others have set up a portfo- 
lio of small stakes or alliances 
ta particular therapeutic areas, 
or even individual projects. 
The balance of bargaining 
between drugs groups and bio- 
technology companies has 
shifted markedly over the past 
12 months. The collapse in the 
share prices of Synergen and 



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Miriam Hughesman on public perceptions 

Distrust remains 


Centocor after the US Food and 
Drug Administration turned 
down their products frightened 
many investors who had not 
realised the risks involved ta 
biotechnology. 

The harshening healthcare 
environment has made initial 
public offerings more difficult 
for the biotechnology bou- 
tiques. In particular, the provi- 
sion in President Bill CKnton’s 
proposed healthcare reforms to 
control the price erf new drugs 
has hit the biotechnology sec- 
tor hard, says Bill Steere, 
chairman and chief executive 
of Pfixer of the US. and outgo- 
ing chairman of the US Phar- 
maceutical Manufacturers 
Association. 

“Often a biotech company is 
based cm the development of a 
single product When it comes 
to the market, that product not 
only has to pay past research 
expenses but also generate 
enough income for the future. 
The biotech groups are risky 
enough anyway. If we end up 
with price controls, then pri- 
vate investors are naturally 
reluctant to make that invest- 


ment,” says Mr Steere. 

Some pharmaceuticals 
groups believe they can create 
Innovative biotechnology 
groups internally. Their 
research directors are clearly 
irked by the propaganda 
pushed by some biotechnology 
companies that the drugs com- 
panies are lumbering giants 
incapable of harnessing the 
revolution proffered by bio- 
technology. "We’ve built one of 
the best biotech groups in the 
industry,” says Dr Scott at 
Bristol-Myers Squibb. 

This, he hastens to add, does 
not mean the company is not 
looking at forming alliances 
with biotech groups or even 
buying them oat, but it does 
provide a level of expertise 
that allows him to make good 
calls when negotiating with 
the boutiques. 


The rapid advances that have 
been made in the biotechnol- 
ogy industry over the past 20 
years have caused much public 
debate. This debate has been 
focused on applications in 
health care, but equally contro- 
versial have been biotechnol- 
ogy developments in agricul- 
ture and food processing. 

Some experts say that the 
lack of public support in 
Europe, in particular, is a 
stumbling block to industry 
progress. 

Studies conducted on the 
public perception of biotech- 
nology over the past 10 years 
largely have concluded that 
the key to positive public sup- 
port is education. Part of the 
problem is the lack of under- 
standing of exactly what bio- 
technology is. 

"People in general have very 
little idea erf what biotechnol- 
ogy is,” says Eiriys Roberts, 
CBE, author of The Public and 
Biotechnology, a study on pub- 
lic attitudes in Europe towards 
biotechnology. "They have a 
clearer idea of the genetic engi- 
neering part of biotech, but 
even that knowledge mostly 
comes from press coverage.” 

In the study. Public Atti- 
tudes to Genetic Engineering: 
Some European Perspectives, 
the author Louis Lemkow 
argues that if the industry can- 
not properly define itself, chal- 
lenges lie ahead. "The term 
biotechnology ftgpff Is problem- 
atic. Even today, many scien- 
tific meetings held on biotech- 
nology are prefaced by lengthy 
discussions on the provision of 

adaqnata rtafiniHnn of the Sub- 
ject,” Mr Lemkow says. He 

adds that with 41 dafinitinma of 

biotechnology in EU docu- 
ments almw, “the number of 
definitions of the work has 
hMnmw a ma t ter of embarrass- 
ment”. 

Dr Keith McCuIlagh, chief 
executive officer of British Bio- 
technology Group and chair- 
man of the UK Bioindustry 
Association, says: "You can’t 
use biotechnology as a generic 
term, it is not a useful descrip- 
tion, it does not tell people 
anything.” He believes that 
people are interested not in the 
biotechnology process but in 
the benefit of the and result. 
"If you tell people you have a 
possible t reatment for cancer, 
the reception will be positive.” 

The European Commission- 
funded EU-wide survey con- 


ducted by Eurobarometer Bio- 
technology and Genetic Engi- 
neering - What Europeans 
Think about it in 1993 - an 
update on the 1991 survey also 
highlights the public’s distrust 
of the industry. 

In ranking order, the most 
reliable sources of information 
on biotechnology and genetic 
engineering are considered to 
be environmental organisa- 
tions, consumer organisations 
and schools and universities, 
according to Eurobarometer. 

Eurobarometer’s study finds 
that less than nna respondent 
in five believes public authori- 
ties provide a reliable source of 
information on biotechnology. 
In Denmark, however, this Is 
nearer one in two. The survey 

‘It is Important to change 

the public's negative 
perceptions' 

indicated that Germans were 
more trusting of information 
from the government authori- 
ties than other European coun- 
tries. 

Regardless of the nationality 
and the applications of biotech- 
nology in question, demand for 
governmental control of the 
various applications is great. 
Whereas the perception of risk 
is particularly high in Den- 
mark the support recorded is 
about the European average. 

Although weaker than regis- 
tered in Denmark the percep- 
tion of risk is also high ta west 
Germany - the second highest 
in the EU. 

To counter this, the Trade 
Ministry of the German 
of North Rhine Westphalia 
recently launched an initiative 
to support investment in bio- 
technology research in the 
state. 

Trade minister Gunter 
Etaert told a conference in 
early May, that "while the 
revised federal law governing 
genetic and biotechnology 
research now gives German 
companies competitive parity 
with foreign rivals it is impor- 
tant to chang e the public's neg- 
ative perceptions of biotechnol- 
ogy." 

Mr Einert said he intended to 
highlight "positive examples” 
of genetic and biotechnology 
research and foster interna- 
tional co-operation. 

In the UK, a department of 


trade and industry-sponsored 
survey revealed that the Indus- 
try’s efforts are failing to win 
support from sections of the 
public which are relatively 
well informed about biotech- 
nology. The study found that 
80 per cent of those questioned 
considered the industry to be 
an unreliable source of infor- 
mation. Some 68 per cent said 
they thought it took short cuts 
with safety. 

Dr McCuIlagh said he did not 
think the full picture had yet 
emerged. "I am confident that 
once biotechnology products 
hit the market and people see 
what great value it has to after 
Britain, public perception will 
be much more receptive,” he 
said. 

Quite a different situation 
exists in the US. Daniel Era- 
mian. vice-president of corpo- 
rate communications for the 
US Biotechnology Industry 
Organisation said US public 
perception was favourable, par- 
tially as a result of the Clinton 
healthcare proposals. "The 
healthcare debate for whatever 
reason, decided to make the 
large pharmaceutical compa- 
nies as the bad guys and the 
biotech companies came out 
looking like the good guys.” 

He also attributes US success 
to what he terms a "freer 
enterprise system”, where 
investors are willing to Invest 
a large amounts of money in 
small companies. "It is part of 
the American dream, the .email 
company striving to become 
bigger and better. There are 
about 1,300 US biotech compa- 
nies and about 75 per cent of 
thwm are email businesses." 

Mr Eramian said he found 
the US media supportive of the 
US industry. "The industry 
provides a lot of information as 
products bit the market We 
explain what it is all about 
including the risks. It is not 
done in a vacuum, it is not 
dishonest and we certainly do 
not give the impression that 
we want to put our beads in 
the sand. People need to know 
what we are doing, if the 
industry is to be successfiiL” 

However Mr Eramian con- 
cedes that “no matter what 
you do, there will always be 
concern over something new, 
particularly if you are not told 
about it” 

Miriam Hughesman is editor of 
the Financial Times newsletter 
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■T. ’ 






FINANCIAL TIMES MONDAY MAY 9 1994 


biotechnology h» 



Clive Cookson finds that a sizeable industry is beginnin g to emerge in Europe 

Moving on to the fast track 


The London Stock Exchange last year relaxed fts Bating rules to make ft < 
companies without a profitable track record to go pufaBe 


far young bkrtoctt 
TmyAndnm* 


on't be misled by the apparent qoi- 
I etness of the European biotechnol- 
ogy scene compared to the US. 

While American biotechnology is a 
cacophony of hundreds of independent 
companies shouting exaggerated claims 
about wonder drags in the early stages of 
development, the loudest noise to be heard 
from the European industry is moaning 
about over-regulation by the EH and 
national governments - particularly on 
environmental and patent issues - which 
allegedly puts It at a disadvantage in com- 
petition with the US. 

hi reality, the gap between Europe and 
the US is narrower than it sounds. The 
illusion of a huge US lead results partly 
from the customary habit of Americans to 
be more positive about their achievements 
t han Europeans and partly because the 
stracture.of the industry is so different on 
each side of the Atlantic. 

US biotechnology is driven antrepre- 
neurially by young companies most of 
which have no products on the market yet 
They hum wiinioTia of dollars a year in 
research and development and their exis- 
tence depends on screaming good news at 
would-be investors, in contrast, European 
biotechnology has developed primarily in 
large pharmaceutical and chemical groups 
on one hanH and in universities and non- 
profit research institutes on the other. Nei- 
ther ramp is so dependent as the US com- 
panies an public relations hype to raise 
money. 

Even so the first survey of European 
biotechnology, published in March by 


Erast & Young, the US-based business con- 
sultancy. identified 400 biotechnology com- 
panies in Europe. That may be only one 
third of the American total but it is more 

t han Ernst A Young had expected. 

The consultants say that when they 
embaifced on the study, their perception 
“was of an industry lagging behind that of 
the US on almost every measure, bar the 
quality of the initial science. What was 
found, however, was a sizeable industry 
emerging, one that is learning how to 
shape its future and 
that realises the 
scope of its potential 
contribution to the 
future European 
e con om y towards the 
year 2000 and beyond”. 

Ernst & Young predicts that the Euro- 
pean biotechnology market will grow 15- 
fold to reach £63bn by 2000 and provide 2m 
new jobs. The key factors accelerating the 
g r o wth of the new industry include: 

• More uniform regulatory policies, 
driven by EU legislation; 

• Increasing awareness of the sector's 
importance toy Investors, governments and 
the EU (last year's EU White Paper on 
Growth, Competitiveness and Employment 
hi g hli g hted the potential of biotechnol- 
ogy); 

• Further development of centres of sci- 
entific excellence, clustering around uni- 
versities; 

• Emergence of exit routes for venture 
capitalists; 


Ernst & Young predicts that at 
least 20 biotech companies will 
be listed in London in a year’s time 


biotechnology companies and large phar- 
maceutical and chemical groups. 

A particularly important change in the 
European financing environment came in 
June last year when the London Stock 
Eyrhangg relaxed its listing rules to make 
it easier for young biotech companies 
without a profitable track record to go 
public. Since then 11 companies, led by 
British Biotechnology, have raised £20Gm 
through »nMai public share offerings in 
London, although no stock exchange on 

continental Europe 

has yet followed Lem* 
don's example. Ernst 
& Young predicts 
that at least 20 bio- 
tech companies will 
be listed in London in a year’s time. Initial 
public offerings on the LSE will raise £ibn 
for biotech companies over the next two to 
three years. 

When it comes to strategic alliances, 
however, the meet common pattern is still 
for the large European pharmaceutical 
groups to form partnerships with US bio- 
technology companies. Roche of Switzer- 
land led the way with its $2.1bn purchase 
of a majority stake in Geneniech in 1990; 
the Swiss group also has minority stakes 
in Chiron and Protein Design Labs and 
collaborative agreements with Amgen, 
Synergen and Hybridon. among others. 

An analysis by Roche of the 55 “major 
R&D alliance s" formed by the global phar- 
maceutical industry in 1993 shows that 52 
of the 55 “technology providers” were US 


More strategic afifanofts between small biotech companies and just three were 


European. The corporate partners acquir- 
ing the technology included 21 European, 
15 US and six Japanese pharmaceutical 
groups - and 11 established US biotech 
companies. 

European companies are beginning to 
make good use of their US contacts. For 
example sobering of Germany has devel- 
oped Betaseron, the first drug proven to 
have a clinical effect on multiple sclerosis, 
in collaboration with Chiron, the Califor- 
nian biotech company, which is manufac- 
turing it in the US; Betaseron came origi- 
nally from Triton, a small US biotech 
company which Sobering bought from 
Shell the Angio-Dutch oil giant 

The European industry has nomptotnefl 
consistently about regulatory burdens that 
are more onerous thanthosoin the US and 
Japan. There has been a particular prob- 
lem with environmental controls (obtain- 
ing permission to release genetically modi- 
fied organisms into the environment) but 
European companies say that the whole 
approach of EU biotechnology regulations 
- concentrating on the process rather than 
the product as in the US - has made h& 
unnecessarily difficult for them. 

But within the past year the EU and 
national governments have responded to 
industry concerns by streamlining regula- 
tions. A further boost will come from the 
European Medicines Evaluation Agency 
which is being established in London to 
provide centralised licensing of new drugs 
from 1995. It is likely to give the EU a 
faster and cheaper approvals process than 
the US Food and Drug Administration. 


J apanese biotechnology is 
scarcely oat of the 
starting blocks. It has 
been left standing by the US 
and even lags behind Europe. 
Yet most Japanese pharmaceu- 
ticals research directors 
believe biotechnology will be 
key to the next generation of 
medicines. 

"We're witnessing a revolu- 
tion in the methodology of 
making drugs,” says Dr Masa- 
hfluj Fqjino, general manager, 
discovery research division at 
Takeda, Japan's biggest drags 
company. “Biotechnology and 
the understanding of human 
genes is creating a completely 
different concept. In the past 


drags were designed to be 
tested on animals. Many com- 
pounds that might have 
proved safe and effective in 
humans were rejected, and 
many that were valid in ani- 
mals just did not work in 
humans,” be explains. 

“Now we are designing 
drugs for humans,” says Dr 
Fujino. "There will be an 
increasingly high probability 
- maybe 50 per cent - for 
drags to pass toxicology. 
That’s double the present 
rate.” 

Dr Masaji Ohno, managing 
director of RAD at Eisal says: 
"We’te well behind.” He 
believes Japanese companies 


Low R&D spending is Japan’s main weakness, writes Paul Abrahams 

Just out of the starting blocks 


may be able to do create some 
innovative work by the begin- 
ning of the next century. 

A few companies have 
attempted to remedy their 
deficiencies by setting np sepa- 
rate biotechnology units. 
Most, however, have tried to 
Incorporate the technology in 
their research and develop- 
ment division. 

“We are producers of medi- 


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cines. If a science leads us to a 
potentially new drag, we will 
try to increase our know- 
ledge,” says Dr Yohihiko 
Baba, director of the Sankyo 
research institute. “Merck and 
Glaxo can afford to concen- 
trate on the technology and 
then the products. We can’t” 
The weakness of Japan’s Mo- 
technology expertise is a 
reflection of the more general 
weakness of Japanese pharma- 
ceuticals R&D. In some areas, 
such as antibiotics, cholester- 
ol-lowering medicines and 
allergy treatments, Japanese 
scientists are among the 
world’s leaders. Bnt the main 
weakness of Japanese R&D is 
that companies spend too lit- 
tle. 

T heir spending, when 
expressed as a percent- 
age of sales, is not poor. 
Takeda invests &2 per emit of 
its turn ov er on R&D, Fujisawa 
148 per cent Sankyo 9.6 per 
cent, Eisai 13.2 per cent 
Shionogi 11.8 per cent Dafichi 
12.3 per cent That compares 
favourably with Merck, the 
biggest US drugs group with 
R&D spending at 11 per cent 
of sales, and Glaxo, Europe's 
biggest company at 18 per 
emit 

But Japanese companies lim- 
ited exposure overseas means 
their overall sales are low and 
amounts spent on R&D are 
tiny. While Merck spent 
$U.7bn on R&D last year and 
Glaxo Sl.lbn, Takeda, the 
largest Japanese company, 
spent only 2557m, and not all 
of that an medicines. Sankyo, 
Fujisawa and Yamanmxbd all 
spent less than $400m, and 
Eisai, Shionogi and Daiichi 
invested less than S300 dl 
I nadequate R&D spending is 
reflected in the number of sci- 
entists in R&D. Merck has 
1,700 scientists in research 
alone, excluding development 
Takeda, has 1,200 in R&D com- 



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blued, while Sankyo has 
between 1,200 and 1,300 in 
R&D. Daiichi employs 600 
researchers and 130 scientists 
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people including administra- 
tion In rfirfimi development, 
safety and formulation, and 
220 scientists in discovery; and 
Yamanonchi has 1,320 in B&D. 
Glaxo employs some 7,500 sci- 
entists - 

Much research is also poorly 
directed. While considerable 
lipservice is given to the need 
for innovation, many R&D 
(Erectors are more interested 
in what they call “survival" 
products. These are com- 
pounds with only small 
improvements on previous 
therapies that, in the past. 


could be used to side-step the 
Japanese Ministry of Health 
and Welfare’s price cuts every 
two years. 

Unlike their western compet- 
itors, Japanese groups have 
proved reluctant to rationalise 
their therapeutic areas, reallo- 
cating scarce resources to 
areas such as biotechnology. 

W hen challenged why 
his company persists 
in antibiotics, a low- 
margin, highly competitive 
arena. Dr Fujino at Takeda 
or plarns the company has an 
historical responsibility. “If 
Takeda doesn’t give up, maybe 
the others wQL” 

Few Japanese companies 
have made up their for lack of 


biotechnology experience by 
links with US and European 
boutiques. In part this is a 
reflection of their insularity. 
Few companies have R&D cen- 
tres outside Japan (although 
some have links with overseas 
research institutions). Sankyo, 
for example, has only 15 R&D 
scientists in the US, and about 
165 in Germany, almost all in 
development Takeda, Japan’s 
largest group, has no research 
centre outside Japan, although 
it is considering setting up a 
unit at a UK university. 

The links that have existed 
between Japanese drugs 
groups and western biotech- 
nology companies have been 
fraught Sazdtyo’S relationship 
with Celltech, the UK biotech- 
nology group, was not success- 
ful, says Dr Masonori Saeki, 
director of the R&D planning 
department, “partly because 
tiie success rate is not high. 
Bnt a relationship like this is 
Hirft a marriage. The human 
factors are very important In 


addition, the economic factor 
is decisive, both sides have to 
have a financial incentive to 
make it work.” 

Clearly, some Japanese 
groups, given their conserva- 
tive practices, feel ill at ease 
with the high-risk, high-re- 
ward approach of the US bio- 
technology industry. Some 
companies, such as Takeda 
whidi has had links with Chi- 
ron, have been braised by 
their experiences. 

“These relationships were 
not very successful,” says Dr 
Fujino. “I do not believe links 
with biotechnology groups 
will lead to ranch.” 

Daiichi says it has aban- 
doned its finks with US bio- 
technology boutiques. “We did 
have a relationship with Cal- 
bio working on Alzheimer's. 
But Alzheimer’s proved very 
difficult mid we have further 
plans to link,” says Dr Hiroyki 
Nagasako, board director for 
corporate planning at Dafidd. 


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FINANCIAL TIMES MONDAY MAY 9 1994 


U 



THE MONDAY 



page 


The longest 
swansong on 
Wall Street 

Richard Waters looks at what makes 
Felix Rohatyn probably the most 
renowned investment banker in America 


Y ou sit in the ante-room and 
wonder at its drabness. The 
oon-descript wallpaper, the 
table too big for the room - 
you have to edge around it to 
peer out of the window on to Manhat- 
tan's West Side. No corporate art collec- 
tions on display hero. 

Who else has been ushered into this 
anonymous receptacle in recent 
months? Martin Davis, the erstwhile 
boss of Paramount Ccuunonlcations. 
perhaps, or Howard Stein, who is sell- 
ing his Dreyfus mutual funds group to 
Mellon Bank Or maybe Stephen Wolf, 
head of United Airlines, which recently 
sold a majority stake to its unions, or 
Garry Wendt whose GE Capital yester- 
day announced an agreed merger with 
the Kemper financial services group. 

A door to the inner office opens and 
Felix Rohatyn sweeps in. Or rather, he 
bustles. A compact, slightly rumpled 
maw in his mid-sixties. Rohatyn moves 
to the for side of the vast expanse of 
table. With sharp eyes behind his thick- 
rimmed glasses, he looks like an alert 
elderly unde. You have to pinch your- 
self to remember that this is probably 
the US's most renowned investment 
banker. Though he will hit 66 at the end 
of this month. Rohatyn, a senior part- 
ner at Lazard Freres, is still very much 
in the thick of things. 

The takeover wave of the late 1980s 
had seemed likely to be his last niwg . 
Nearly six years ago. Business Week 
was moved to ponder “the post-Felix 
era" at Lazard: “Rohatyn at 60 is not 
the ravenous gatherer of new business 
be once was.” But the 1990s takeover 
boom has projected him back into the 
limelig ht, even as many of his contem- 
poraries are moving into retirement 


“There is a generational change,” says 
one (much younger) merger and acqui- 
sition head on Wall Street “But Felix is 
Felix - he gets introduced to other peo- 
ple by people he knows.” The business 
gathering Tiac not faltered. 

Rohatyn's swansong can probably be 
attributed in equal measure to ins con- 
tacts, his reputation, and his style. The 
contacts have been formed over many 
years: the relationship with Howard 
Stein, the 66-year-old head of Dreyfus, 
dates back 25 years, says Rohatyn. Mar- 
tin Davis, who retained the Lazard 
banker to advise m*h cm the sale of 
Paramount is also a long-term friend. 

The election of a Democratic presi- 
dent has buqyed the fortunes of Roha- 
tyn, himself a life-long Democrat and a 
man once talked of as a Clinton Trea- 
sury secretary. A position on the airline 
commission set np by the Clinton 
administration last year served as an 
introduction to Wolf of United Airlines. 
Wolf was having trouble persuading the 
airline's unions to make big conces- 
sionsin return for a majority stake. “He 
showed up one day in my office and 
said he would like to retain us - and 
me specifically - because he thought it 
would help to convince the nninns that 
he was serious,” says Rohatyn 

If Rohatyn's style suits the times, it is 
because he largely stood back from the 
“binge of leverage” in the late 1980s, 
says Martin Lipton, the US’s top take- 
over lawyer, and a contemporary and 
dose friend. The more considered, less 
super-heated takeover market of the 
1990s has suited him better. 

Rohatyn himself characterises the 
current wave of takeovers in the US as 
being “driven by technological or regu- 
latory or legislative changes - whether 



C. V*'' 
* T ‘Vt- 


it is the regulation and technology of 
communications and media, the legisla- 
tion «wri the changes «»nhig in health- 
care, or in h anking , or in mutual 
funds”. His verdict on the resulting 
restructuring in some of the biggest 
industries in the US: “It's real - it's 
reality. It’s not whether you can sell a 
junk bond to an S&L.” The exception, 
perhaps, was Paramount. The stress of 
that SlObn battle is clear from Roha- 
tyn's verdict now: “Probably the most 
difficult and personally -draining experi- 
ence I have ever been through.” 

His reputation did not emerge 
linsnathpd. Last summer, with Rohatyn 
advising him, Davies agreed an $8bn 
takeover by Viacom in a transaction 
designed to discourage any other bid- 
ders. The courts later ruled that cozy 
deal illegal, opening the way for a bid- 
ding war which eventually forced Via- 
com to pay some JlObn for its conquest 
(and left Davies without a job). 

Rohatyn still sticks by the original 
plan. Explaining why the agreed deal 
with Viacom had been hatched, he says 
that, even though the deal was widely 
leaked, no one else forward to 
express an interest in the buying the 
group - and “yon don’t shop a ? 10 bn 
company around, you really don’t - it 
doesn't happen.” He adds: “1 would 
argue frankly that the original deal 
would have created a very powerful 
company in terms of capital structure. 
That, over time, would have been a 
much better deal t h an going through 


this whole agony and winding up with 
a highly -leveraged business that will 
require dispositions of assets.” 

Rivals, though, say Rohatyn should 
have put Paramount’s shareholders 
first. “He got a black eye. We will use 
that when taRring to their dlsints in 
future," says a senior investment 
banter at another Wall Street firm. 

Davis is leaving Paramount Stein, at 
66, is unlikely to stay long with Mellon. 
Wolf is planning to step down when Of) 
United's shareholders approve the 
buy-out (“I cant take credit for that 
one - he had decided to leave before he 
even showed up in my office,” says 
Rohatyn.) The loss of old ties makes 
businessgathering harder. 

And Rohatyn, though active, is less 
intimately involved in deal-making 
than he was. “Back in the 70s, we 
would go seven days a week, 14 or 16 
hours a day," says Lipton. Not any 
more. “Felix takes more vacations than 
he used to, and he doesn't work as hard 
as he used to — nrmp of us in our sixties 
[does]." For now, he does not plan to 
leave lazard - thoug h “I certainly do 
have plans to spend more time on other 
things.” He is involved on a UN com- 
mission, acts as vice chairman of Car- 
negie Hall and hopes to serve on other 
official US commissions, for instance. 

If the right offer came from the Clin- 
ton administration? “If the president 
asks you to do something, you do it - 
but it’s certainly not something 1 expect 
or am seeking." 


Personae . . . 

Reinshagen: from fine 
art to UBS boardroom 


Staid old Union Bank of 
Switzerland will have to go 
some way to provide Maria 
Reinshagen. one of two women 
it has just elected to its board, 
with the ktnd of thrills she has 
known in the fine art business, 
lan Rodger In Zurich. 

Reinshagen. deputy 
chairman of the Swiss 
subsidiary of Christie's 
International, was the 
underbidder for Van Gogh's 
Portrait du Dr Gachet in May 
1690 when Ryoei Saito, a 
Japanese paper magnate, won 
it with a $75m bid. With the 
10 per cent commission, the 
98SL5m is still the highest price 
ever paid far a painting. 

"By the end, my heart was 
about to jump out of my body." 
recalled Reinshagen last week 
of the feverish bidding. 
Described by Christie's 
chairman Sir Anthony 
Tennant as the group’s number 
one business getter, she says 


After drifting for two years 
without a permanent 
helmsman, the agency which 
supervises the rapidly growing 
and often controversial 
derivatives industry in the US 
has now found a well-qualified 
new head-Ln-waitmg. President 
Clinton last week said be 
intends to nominate 38-year-old 
Mary Schapiro as chairman 
of the Commodity Futures 
Trading Commission, writes 
Laurie Morse in Chicago. 

Schapiro was most recently 
a commissioner of the 
Securities and Exchange 
Commission, and hence on the 
other side of the turf wars that 
erupt between the rival 
agencies at frequent intervals. 
But she has also had a cosy 
association with the 
derivatives industry for most 
of her 14-year career. 

Having started an 
enforc ement attorney for the 
CFTC, she quickly became 
executive assistant to the 
chairman The bulk of her time 
- 9 years - was then spent as 
a lobbyist for the industry in 
her capacity as general counsel 
for the Futures Industry 


she throws herself fully into 
everything she does. 

She studied violin as a child 
and played in professional 
orchestras in Switzerland and 

the US in the 1960s. But she 

gave it up in 1966 when the 
first of her two children was 
bom. A school teacher by 
training, she started in the 
art business in Zurich In 1961, 
working in galleries there and 
in Los Angeles until setting 
up a Zurich outlet for 
Christie’s in 1978. 

Inevitably, both she and 
Anne-Lise Mourner, the other 
woman joining the UBS board, 
have been labelled token 
women. Reinshagen, who did 
not even campaign for 
women's voting rights in 
Switzerland in 1971, says she 
is apolitical and has never had 
problems working alongside 
men. She has, however, fought 
vigorously to reform the 
country’s perverse primary 


Association in Washington. 

And though she left the FLA 
in 1968, appointed by Ronald 
Reagan to the SEC, she has 
maintained her personal ties 
to the F1A. The relationship 
has served her we ll; he r 
candidacy for the CFTC chair 
was actively encouraged by 
futures practitioners, who 
heaved a collective sigh of 
relief last week. 

Given the intense criticism 
aimed at the whole field 
recently, it might seem 
surprising Clinton picked an 
industry advocate to become 
its chief watchdog. But 
Schapiro's supporters, 
including Arthur Levitt. SEC 
Chairman , argue that a detailed 
grasp of this dynamic comer 
of the finan cial world is 
essential for the position, and 
that Schapiro's broad 
experience with the SEC and 
CFTC will benefit the 
inter-agency co-operation now 
seen as critical for derivatives 
regulation. Schapiro intends 
to stay at the SEC until she 
is formally nominated to the 
CFTC and has Congressional 
confirmation to the post. 


school hours, which are 
deliberately designed to trap 
mothers at home. 

She joins the UBS board at 
a potentially exciting time. 

Her election was in doubt till 
the end because of a motion 
by activist shareholder BK 
Vision at the recent AGM to 
slash the board's membership 
from 23 to nine. The motion 
was defeated, but the 40 per 
cent support for BK and its 
intense chai rman Martin 
Ebner showed that the bank's 
directors will have to pay 
much more attention to 
shareholder interests than they 
have in the past. 

Reinshagen suggests that 
Ebner erred only in pushing 
the issue in the year when UBS 
finally invited two women to 
join, and in fixing on nine. "By 
coincidence, nine is my 
favourite number, but for such 
a large bank, it is too low a 
figure." 

Derivative 
move across 
the Rhine 

After playing an important 
role in shaping the French 
derivatives industry, 
39-year-old Antoine Faille has 
crossed the Rhine to set up 
Commerzbank’s new 
derivatives venture, Commerz 
Financial Products (CFP), 
writes Conner Middelmann. 

An options specialist, Paille 
was an early recruit to 
derivatives in Paris, and sat 
on the commission that 
drafted the relevant 
regulations. He spent a decade 
building np Socidtd Gdndrale’s 
derivatives capabilities and 
left last October, “ready for 
a new challenge”. 

He remains cagey how met 
Rudolf Duttweiler, 
Commerzbank's capital 
markets and treasury boss, 
who was head-hunted from 
CSFB m London a year ago. 
But he says they had an 
almost instant meeting of 
minds as to how to approach 
the business. 

The smallest of the big three 
German banks, Commerz is 
the first institution in 
Germany to set up a 
derivatives subsidiary. 


A future on other 
side of turf war 



PATHWAYS TO PARTNERSHIP. 


■ Every new venture begins with an idea - and 

with a risk. Whether that involves international 

trade, equity investment, corporate borrowing 
or liquidity management, your 
new associate represents an 
unknown quantity. So diverging 
interests, and the incalculable 
human element inherent in every business 
relationship, present possible impediments 
to cooperation based on mutual trust. ■ 
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DGB4NK6 






MANAGEMENT 


A ssembly-line workers 

Jeered Terry Morgan, the 
chief executive of Land- 
rover, when he addressed a 
factory meeting wearing grey over- 
alls. They thought it was some kind 
of gimmick 1 . That was three years 
ago, he is still wearing them, and 
people don’t jeer anymore. 

Managers admit that outsiders 
can still find it disconcerting to be 
greeted by a British executive in a 
grey “workers” suit, rather like 
coming across someone from the 
Chinese communist party central 
office , mid-cultural revolution, on a 
number seven bus. The comparison 
gr o ws more acute at Rover which, 
perhaps more than any other Brit- 
ish manufacturer, has been under- 
going its own cultural revolution. 

New Deal, the company's agree- 
ment with the unions in 1992, 
secured a management pledge of job 
security for all. The way that tt is 
being engineered has led to same 
tough career decisions far managers 
and administrative staff watching 
their old jobs disappear through 

Current Rover vacancies are 
almost all in assembly-line jobs but 
when the company asked for volun- 
teers last November from white-col- 
lar staff to move across, few stepped 
forward. So far only 200 out of a 
hoped-for SOO or so have crossed 
over to hourly-paid production Jobs 
and not all have yet signed new, 
blue-collar contracts. Others are 
thinking about it Staff report a low- 
ering of morale among many of 
those canvassed to consider chang- 
ing jobs and the company admits it 
will have to recruit Gram outside. 

The need to encourage cross-overs 
became apparent when Rover found 
itself top-heavy with clerical and 
adminis trative employees. Its shift 
foom volume car producer to niche 
manufacturer has led to greater 
emphasis on front-line production 
workers. 

At Landrover, far example, after 
the vehicle frame has come out of 
the body shop into the main assem- 
bly plant, there are no robots, and 
all the work is done by hand. Com- 
puter-based ordering, which allows 
any specification on any model to 
be tapped down the telephone Hue, 
is reducing the c leric al roll. This 
has led management to seek greater 
flexibility in the workforce. Part of 
this process includes encourage- 
ment of and opportunities for con- 
tinuous skills development through 
course work at Rover’s training and 
development centre. 

Much of the groundwork cm har- 
monisation of conditions of service 
has already been established, but 
removing the old white-collar, blue- 
collar distinction In employees’ 
minds is more difficult One way 
has been to encourage white-collar 
staff to take part in assembly-line 
work on Saturdays. Another prac- 
tice developed to create all-round 


Rover's cultural 

revolution 

Richard Donkin discovers what white-collar workers do 
at the car manufacturer when their old jobs disappear 






# - 




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Malcolm da Saufles, who went from finance analyst to production-!* work: *Fcr tha first fortnight I couMnt move a muscle* 


From white lane to blue 


M alcolm de Saolles, in his 28th year with 
Rover, saw his post as senior finance analyst 
disappear 18 mouths ago. But while Us job 
became redundant, he did not, moving through a series 
of project posts until he was asked if he would accept 
production-line work. 

He now works on the Discovery transfer case, the 
part that is attached to the gearbox and converts the 
vehicle to four-wheel drive. “For the first fortnight I 
couldn’t move a muscle. It was devastating. Than I got 
used to tt and now tt is great,” he says. 

For others, sncb as John McSheffrey, a heat treat- 
ment supervisor, the transition has been more diffi- 
cult He has no intention of going to an hourly-paid job 
and is seeking other opportunities within and outside 
the company. “I want to be a production manager if X 
can, whether here or elsewhere.” 

Lynne Hindmarsh, a forma' clerical worker in credit 


awareness of the assembly role has 
been far new graduates to complete 
what has been dubbed “national 
service” far three months on the 
production line. 

The Tn ain difficulty for those Who 
have opted to cross over has been 
making the adjustment (see above). 
Complex emotions are involved 


when people who are used to arriv- 
ing with a briefcase are asked to 
don overalls and wield a spanner. 
Although the management has tried 
to remove the trappings of status 
they have not been completely ban- 
ished Grom people's minds; amd- far 
some the physical dwnqndg of the 
new job are too much. 


Executives not wearing overalls 
are more likely to attract sarcastic 
raTnTnp'nts today. When Bernd Pis- 
chetsrieder, the BMW chairman, 
visited the Rover plants immedi- 
ately after BMW’s takeover 
anffnimw>mp nt in February, “we 
had some overalls run up for him 
although the tab was a bit of 
a problem. It almost ran down his 
sleeve," says David Bower, Raver's 
directo r of person n el. 

Rover na me fahs do not indicate 
position. Like many of Britain’s 
newly restructured companies. 
Hover has a flattened-out manage- 
ment structure. Tm only one step 
away from the managing director’s 
job," says Bernard Sullivan, Rover’s 
t raining and development manager. 
Sullivan enjoys a reputation as 


jvmrriiimfl vi a +*** “ - — ■ 

1st on the conference circuit and his 
views command respect - yet you 
could not tell him from a council 
binman by his dress and that is how 
Rover wants tt. 

The philosophy an working prac- 
tices goes much deeper than dress, 
however. Many of the ideas are 
drawn from Japan, although man- 
agement was sceptical that Japa- 
nese culture could be transported to 
Rover before they saw how tt had 
been adapted in a US Honda factory 
in Marysville, Ohio in 1986. “Sud- 
denly we were thinking if it can 
happen in the US, it can happen 
here,” says Bower. 

The need for change had already 


control and inventory, has signed a contract as a 
fork-lift track dri ver on the production line. 

”1 had done a succession of projects since my former 
post was displaced, then IS of us in my area were 
ashed if they wanted to go on to die production line. 
Only two of us said we would. Frankly, it's hard work. 
I didn’t realise how easy it was behind a desk.” 

All who cross over to production-line jobs have been 
guaranteed their former salaries for two years. With 
the opportunity to earn overtime on top it has 
increased earnings potential in the short term. “1 can 
gross £700 a month in extra overtime so financially I 
have never had it so good,” says de Sanlles. 

In the long term, however, all of them know their 
salaries are not assured. De Sanlles says he has not yet 
opted to change his contract but is thinking about 
doing so. “rm very happy doing whatTm doing, which 
I cam-1 understand in some respects, but lam.” 


Equality in the workplace is 
beginning to happen, led by man- 
agement Equality, used in this con- 
text does not mean equal pay for 
all or even equal perks. Bat it does 
mean a removal of the “us and 
them" barriers, the boss-worker 
relationship and the old. concept of 
status. 


company carried out the first of a 
series of attitude surveys among 
employees. “The things people told 
us were important to them have not 
changed over , the years. They 
wanted a degree of challenge in 
their work and to participate in 
problem solving. They were con- 
cerned about the quality of training 
to develop the skills to do their job 
and they wanted opportunities to 
advance themselves in the business. 
They were concerned about the 
quality of communication and the 
quality of leadership,” says Bower. 

Sullivan explains the new 
approach to flexibility thus: “There 
may well be a job for life but it 
won’t be the same job. You may 
start out as a fitter, become manag- 
ing director and end up as a fitter” 

Rover says Hschetsrieder has no 
plans to change working practices 
at the Rover plants, nor do Rover 
managers plan to copy BMW 
systems. The main impression from 
visiting Rover plants today is that 
there is a much greater degree of 
honesty between management and 
the workforce. It is a far cry from 
the British Leyland days. 

“There is no end to this story,” 
says Bower. “Continuous change is 
part and parcel of befog competitive 
and staying alive. The challenge is 
to maintain the bulk of the 
improvement so people become part 
of it but not overwhelmed by it” 


FINANCIAL TIMES MONDAY MAY 9 1994 


Peter Warr says it’s time to put 
an end to age discrimination 

Old soldiers do 
not fade away 


S tereotypes about older 
employees give rise to a 
great deal of prejudice. That 
is obvious to the middle-aged 
manager who becomes 
unemployed and has to start 
applying for jobs. 

Invalid negative stereotypes, 
though, also determine what 
happens to people who are still 
in work. These have been 
reinforced in recent years by toe 
widespread encouragement of 
early retirement for many 
managers. Those individuals are 
thereby publicly defined as “too 
okT, and as a result negative 
attitudes to other people of the 
same age become even mime fixed. 

Research has Indicated that 
the stereotypes applied in 
; decision-making about older 
workers are widely incorrect 
i The mental decline that takes 
place up to the raid-SOs is very 
I small, and is limited to only a 
few types of information- 
processing. In most activities, 
there Is no overall difference 
I between the work performance 
1 of older and younger staff. 

Furthermore, older employees 
have available depths of 
I knowledge and expertise built 
op over years of relevan t 
i experience. 

Prejudice against older staff 
Is often seen in decisions taken 
about tiie provision of training 
at different ages. Many companies 
restrict learning opportunities 
at older ages, for instance by 
emphasising that Individuals 
cannot be spared from their 
immediate work activities. 

Two surveys by the London 
School of Economics have found 
that the amount of training 
declines rapidly as a manager 
gets older. This Is despite the 
belief (expressed by nearly 90 
per cent) that “the business 
environment is changing so 

rapidly that managers need more 
training In the past”. 

As a result of tills 
age-imbalance, older managers 
can become out of practice as 
learners, and they sometimes 
feel uneasy about entering new 
training situations. But that is 
not to say that they cannot learn. 
Other research has shown that 
older individuals can acquire 1 new 


skills and knowledge, especially 
when learning involves practical 
activities rather than being 
merely abstract and unused. 

Older learners, In particular, 
benefit from opportunities to torn 
Into action the general principles 
and specific facts which need to 
be acquired. 

So what to do? First, throw out 
the overall negative stereotype. 
Look at the person, not at Us 
or her age. 

Second, if some staff changes 
are essential, ensure that early 
retirement or age-based 
redundancy are not automatically 
viewed as the primary option. 
Think Initially about other routes 
to competitiveness, through job 
redesign, lateral transfers, 
training and other procedures 
which can utilise important 
expertise and knowledge. 

Third, if a number of older 
managers have to be asked to 
leave, seek to retain their skills 
through some form of subsequent 
contract, perhaps intermittent 
or part-time, or perhaps as a 
consultant 

Fourth, and most 
fundamentally, work towards 
a culture of adaptability at all 
ages. Current levels of 
competition and the pace of 
change mean that new Ideas, 
procedures and products must 
be sought all the time. 

The best way to develop 
adaptability Is to keep people 
learning. It often makes sense 
to plan the movement of 
managers sideways to different 

jobs, where new demands will 
be placed upon them- tt Is dear 
that flatter organisations will 
require career ladders to be . 
shorter. 

In a corporate culture of 
con tinned learning, the strengths 
of toe older manager can be a 
foundation for company success. 
At present, too many 
organisations are responding to 
a sodaUy-foshtonable idea that 
youth is best Research makes 
it clear that neither youth nor . , 
age Is in fact best: it all depends 
an the individual. 

The author is a research professor 
at the Centre for Economic 
Performance, LSE L 


I ft ’ 1 
TIT’ 


funnel opt* 

B : . ■ 


BUSINESS TRAVEL 


O nly an hour by air from 
other Aslan business 
centres, with their tow- 
ering office blocks, glitzy 
hotels and pollution, Hanoi 
could inhabit another world. 
Its crumbling colonial villas 
and tree-lined avenues give it 
the appearance of a town in 
southern France. It has only 
one live-star hotel and its most 
common form of public trans- 
port is the cyclo, a sort of bath 
chair pushed by a bicycle. 

Anyone who has spent hours 
in a Bangkok traffic jam will 
appreciate one of the Vietnam- 
ese capital’s greatest pleasures 
- it rarely takes more than 15 
minutes to get anywhere. But 
this is the only time-saving 
aspect of doing business in the 
city. “If you think you’re going 
to fly in to Vietnam and sign a 
deal after one week you're 
naive. And if you do sign a 
deal after a week you’re fool- 
ish,” says David Drinkard, Dig- 
ital Equipment’s representa- 
tive in Hanoi. 

Whereas in Hong Kong or 
Singapore business can be con- 
ducted by fax or phone. In 
Hanoi almost everything 
requires at least one, often 
drawn-out, meeting. The Viet- 
namese delight in formalities 
requiring elaborate ceremo- 
nies, complete with champagne 
(Russian) and photo sessions. 


Sarah Murray on the charms and hassles of doing business in Hanoi 

Another dragon awakes 


Meeting venues are dingy 
rooms where low-slung sofas 
are usually placed on either 
side of a coffee table across 
which delegations face each 
other, sometimes peering 
around a vase with a couple of 
dusty plastic roses in it 

Compared with their coun- 
terparts in. other Aslan centres, 
Hanoi officials and business- 
men are inexperienced when it 
comes to International deals. 
“They're not uneducated but 
they haven't been exposed to 
such things os business plans 
and requests for proposals," 
says Mr Drinkard. This makes 
it advisable to reiterate detail 
as Vietnamese, like most 
Asians, hate losing face and so 
rarely question things they do 
not understand. 

Yet any foreigner who thinks 
he or she Is dealing with peo- 
ple who have no knowledge of 
the outside world is wrong. 
Hanoi is a city of linguists. 
Languages spoken range from 
French and Russian to Chinese 
and Spanish, (with a Cuban 
accent). Links with communist 


High - and dry 
if you want it 


W ine-enthusiast read- 
ers of Business Trav- 
eller may feel rather 
short-changed by last month’s 
Issue. For the last eight Aprils 
the London-based magazine 
has published the results of its 
trail-blazing comparison of the 
big airlines' wine selections. 

But this year its editor, GUI 
llpton, has bowed out of the 
comparative tasting notes and 
rankings game, partly because 
of the “nightmare” of organis- 
ing last year's taste-offs actu- 
ally in-flight (at the behest of 
the airlines), but also because 
business travellers seem to be 
less and less interested in what 
they eat and drink. 

In the ID years the magazine 
has been polling its readers on 
how they rate airlines’ attri- 
butes. food and wine has fallen 
from fourth to ninth place. 

This drop may, of course, 
reflect the considerable 
Improvement in in-flight cater- 
ing since the early 1980s. Cer- 






”• A- ■ ^7 - 

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tvm "■ ; ; ; 1 1 ■ 


A French-style colonial villa in toe old quarter of Hanoi, which now serves as a shop 



countries were once strong and 
many Vietnamese studied or 
worked in eastern Europe or 
the farmer Soviet Union. 

From its own communist 


past, Vietnam is befog hurled 
into the 21st century at an 
al arming pace. In offices which 
seem unchanged since the 
1940s, there will be a cordless 


telephone. And the crumbling 
terracotta roofs of ministries 
sprout satellite dishes. 

There are signs that Hanoi Is 
quickly learning how to accom- 


modate the hordes of business- 
men clamouring to enter what 
they predict will be the next 
dragon economy. 

It is now possible to phone 
for an amconditioned taxi or 
order a takeaway pizza from a 
restaurant run by an Austra- 
lian. 

Decent accommodation, how- 
ever, is less easy to find and 
expensive when you can. The 
Metropole remains the only 
hotel meeting western stan- 
dards and is usually fully 
booked. But a host of mini-ho- 
tels are springing up. These 
are eight- to 10-room wonders 
where, among the kitsch stat- 
ues of Greek goddesses and 
hideous nylon, bed linen, staff 
are friendly and satellite TV 
and IDD facilities are available. 

Sinoe credit cards and travel- 
lers cheques are not in wide 
use it is best to take cash. Dol- 
lars are eagerly accepted and it 
is adviseable to have a supply 
of dong, the local currency, 
since a cyclo ride costs only a 
fraction of a dollar. 

But Hanoi, whether charm- 
ing or frustrating for the trav- 
eller, is changing fast. 
Multi-million dollar hotel pro- 
jects, high-rise apartments and 
office blocks are planned, and 
these threaten to alter radi- 
cally one of Asia’s most 
delightful cities. 


Mon-.; Tua 


THIS ONE HAS ft GOOD NOTE,,. 


talnly a number of airlines 
have targeted food and, partic- 
ularly, wine as a significant 
marketing tooL According to 
Peter Nixson, British Airways’ 
chief cellarer: "Wine is one of 
the areas in which you can 
make a significant improve- 
ment over your competitors." 

Most of the big airiines have 
been hard at work on their 
wine lists over the past few 
years, sometimes sponsoring 
wine competitions and often 
hiring outside help. American 
Airlines, for example, has fea- 
tured its wine expert Dr Rich- 
ard Vine, looking serious In 
tenebrous cellars. In its adver- 
tising campaigns. 

BA meanwhile has called 
upon the services of wine 
writer Hugh Johnson, Michael 
Broadbent of Christie’s and 
Master of Wine Colin Anderson 
to help select the 340,000 cases 
of wine it buys each year. And 
Singapore Airlines has regu- 
larly fought BA and American 


C xZZZjTh 


Airlines for first place in inter- 
airline wine comparisons, 
thanks to its panel of tasters 
carefully drawn from Britain, 
Australia and California. 

It Is BA’s Anderson who has 
conducted some of the most 
detailed research on the psy- 
chological and physiological 
effects of wine drinking in the 
air. He maintains that our tast- 
ing ability is impaired at 33.000 
ft chiefly because of dehydra- 
tion which dries out the sen- 
sory membranes. 

The upshot is that acidity 
and tannin tend to be accentu- 
ated, malting even the fruitiest 
champagne taste leaner than it 
should, and flattering fruity 
exuberant wine styles such as 
those produced in the New 




World. 

The cabin pressurisation also 
tends to thin the blood slightly, 
winch means that the effects of 
alcohol are accentuated. This, 
together with the generally 
dehydrating effect of air travel, 
means it is essential to alter- 
nate non-alcoholic drinks with 
alcoholic ones. 

Another important factor is 
stress. For many travellers, 
alcohol is used as an antidote 
to fear of flying, or simply a 
release from an angst-ridden 
airport experience. 

As Nixson puts it: “The 
chances are that the first glass 
goes down without even touch- 
ing the sides of the mouth,” 

Janris Robinson 


Travel variations 
across Europe 

H otels and airiines are decision-making to depart 
busy promoting dls- meats or a combination of indi 
count prices, but com- viduals and denazimmbL 


H otels and airiines are 
busy promoting dis- 
count prices, but com- 
panies are under no illusions 
that travel still accounts for a 
big slice of their costs what- 
ever is on offer. A study by 
market researchers Mori for 
travel agency Thomas Cook 
says that travel is the third 
biggest corporate expense in 
Europe after salaries and infor- 
mation technology. 

Almost half the 298 compa- 
nies questioned had a firm pol- 
icy to control corporate travel, 
but the details varied by coun- 
try and business sector. Bank- 
ing and finance companies are 
the most likely to impose a 
company-wide travel policy. 

The UK had the highest pro- 
portion, 59 per cent, of compa- 
nies where travel policy was 
made at the corporate level, 
and the second highest, 25 per 
cent, with the individual trav- 
eller having the sole control. 
The remaining companies left 


decision-making to depart- 
ments or a combination of indi- 
viduals and depar tmen ts. 

Germany, by contrast, relied 
on departmental rules more 
than other countries and had 
the second lowest level of con- 
trol, 30 per cent, at the corpo- 
rate level. Other national char- 
acteristics included French 
companies' enthusiasm for 
driving a hard bargain with 
the travel agency, while the 
Swiss and Swedes were least 
concerned about money. 

Four out of five Italian com- 
panies rated it important or 
very important for the agent to 
be nearby, a factor which was 
hardly relevant for Swiss, 
Swedish and Dutch companies. 

Swiss companies are keen on 
their travel agents taking a 
back seat in travel manage- 
ment, while the UK, Sweden 
and France want their agency 
to be "proactive". 

Daniel Green 


UC: -l?.- 
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wed . • Hmr. ; i* • 



Continental 
Airlines cuts 
fares to 
Europe 

Continental Airlines has 
announced new one-way fares 
from the US to Europe. 

According to the airline, 
these will reduce the price of 
some tickets by up to 67 per 
emit The fully-refimdable, 
unrestricted fares are available 
on every seat on every flight 
and do not need to be 
purchased In advance. 

A flight to London will cost 
between $349 mid 9499 each, 
way. Fares to Paris range from 
$399 to $499, and those to 
Frankfort, Munich and Madrid 
will cost from $349 to $549. 
Fares for weekend travel are 
$50 higher. 

American Airiines says it 
will match Continental’s fares, 
but only on a round-trip basis 
until September 15. 

Trans World Airiines says 
it will respond with 
fully-refunabie, one-way fares 
in certain International 
markets. 

Delta Airlines is looking at 
the new fare structure but is 
not sure it will fallow suit 

United does 
more business 
at home 

United. Airlines said last week 
that domestically it had 
experienced stronger traffic 
and improved passenger loads. 


TRAVEL 

UPDATE 



“These were driven in part 1 
by low fares,” said J C Pops* 
president and chief operating 


United's total scheduled ... 
revenue passenger miles 
(RPBdGs) increased 6.1 pec cent 
in April, compared with the 
same month of 1993. Available 
seat miles rose by 0 £ per corf. 


load factor was 68.1 per cent, 
compared with 64.7 per cent 
a year ago. 

The airline's total scheduled 
RPMs were flATba compared 
with 7.Sbn In the same month 
of 1993. 

United flew 5.75m - . 

passengers in scheduled 
services in April, an increase 
of per cent over toe SJBffl '. 
flown a year earlier. 

Granada cuts 
cost of calls 

Granada Lodges, the UK hotel 
chain, has introduced the 
British Telecom payphone 
standard of lOp per unit attts 
21 lodges nationwide. BT 
payphones have been put In ; 
all rooms and accept 
commercial credit and charge' 
cards. 










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FINANCIAL TIMES MONDAY MAY 9 1994 


ARTS 


Architecture/ Colin Amery 

To reconcile two 
quarrelling sisters 


T here is a theory that the 
English find it difficult to 
think in three tWmpnginru; grid 
that the plastic arts are less appreci- 
ated here than the two dwnanrinn^ 
or the literary. This exhibition 
shows that it has not always been 
the case. Architects' designs for sculp- 
ture 1600-1951 (until June 11, RIBA 
Heinz Gallery 21, Portman Square, 
London, Wl) may not sound the 
most gripping of titles but the sub- 
ject is a fascinating and much 
neglected one. 

Tim Knox, the curator of the exhi- 
bition, is one of the few scholars and 
historians with a real love far sculp- 
ture as well as an understanding of 
architecture. He quotes, in his small 
leaflet that accompanies this exhibi- 
tion, the Immortal words of Ruskin: 
“Architecture stripped of sculpture 
is at best a convenient arrangement 
of deal walls; associated, they not 
only adorn but reciprocally exalt 
wpp.h other, and give to all the arts of 
the country in which they exist, a 
correspondent love of majesty." 

When looking at this exhibition, 
spanning some 450 years and taken 
from the rich archives of the RIBA 
drawings collection, we see how 
sculpture and buildings had always 
been natural handmaidens. As we 
enter the entrance hall, the first 
thing we see is the splendid model of 
the Festival of Britain Sea ami Ships 
pavilion, designed by Sir Basil 
Spence in 195L This fascinating but 
temporary building was embellished 
throughout with works of art 
It was in many ways a model of 
how things might have been if mod- 
ern architects had continued the 
kind of collaborative partnership 
that Spence encouraged with other 
artists. He was to do the same thing 
at Coventy Cathedral, where 
Epstein’s figures of St Michael -and 
the devil are among the last conven- 
tional figurative sculptural commis- 
sions for a public building in this 
century. We have now become much 


more used to the inevitable Henry 
Moore on its lonely plinth outside a 
contemporary building. 

No one can doubt the fact that 
sculpture and architecture are sister 
arts - but standing as we do, con- 
templating the sad fag-end of mod- 
ernism at the end of this century, all 

one can see in contemporary build- 
ings is the visible evidence of the 
sisters' quarrel and faffing out. 

The lack of understanding of 
sculpture, or indeed many of the 
visual arts, by contemporary archi- 
tects is yet another example of their 
isolation. Knox does not enlighten 
us much about the curren t divorce 
between artists and architects 
beyond saying that engineering Is 
now the ra ting force in architecture, 
and that «wnpfhing ttip Lloyds’ 
buflding is ttyjf so much a three 
dimensional object that it leaves no 
room for any other form of artistic 
commission. 

A rchitects traditionally learned 
to draw from the casts of 
antique sculpture, and on 
their Grand Tour travels in Italy and 
Greece, it was sculpture as much as 
architecture that took the eye. The 
evidence cf those travels shows up 
well In the early part of the 18 th 
century when p edi m ent s and sky- 
lines of new town and country 
bouses were bristling with authenti- 
cally classical sculpture. The choice 
of subjects for pediments, “Hercules 
cleaning out the Augean cow byres*, 
for example, ranges from the bizarre 
to the conventional. The formal 
arrangements of ef ghtarmfh wwitu r y 
classical architecture demanded con- 
trolled cooperation from sculptors 
and they clearly enjoyed the disti.- 

pHne Of w orking within a nlastrical 
framework. Sculptors of the calibre 
of Rysbrack and Flagman enjoyed 
the chance to work an a large scale 

and in pr ominent places , 

Knox is wise to point out that the 
Reformation killed off religious 


sculpture in England; and the mod- 
est scale of royal and state patron- 
age also denied architects and artists 
the chance offered to their European 
colleagues ~ that of working on an 
heroic ««ie- English Baroque archi- 
tecture does not have the sculptural 
content cf much European architec- 
ture of the same date. 

By the middle of the nineteenth 
century there was a flowering of 
sculpture and decoration that 
matched the boom in architectural 
commissions. The Gothic revival and 
especially the work of Pugin and 
Barry at the Palace erf Westminster 
brought the combination of the plas- 
tic arts and architecture to an unsur- 
passed apotheosis: the Great Exhibi- 
tion of 1851 and the revival of 
church fUmishings encouraged by 
the Ecdesiological Society almost 
led to the mass production of orna- 
ment and sculpture. Commercial 
firms took on the task of promoting 
ornament and the manufacture of 
artificial stone, terracotta and other 
materials made sculptural decora- 
tion universally available. The draw- 
ings in the exhibition of the Alfred 
Waterhouse’s Natural History 
Museum show anthropomorphic art 
and decoration on a scale that no 
architect could ever imag ine today. 

1 particularly admired the intense 
drawings of Henry Wilson, who was 
to abandon full scale sculptural 
work and concentrate on his Arts 
and Crafts jewellery. His First World 
War memorial at Tonbridge school is 
a brilliant creation and it is a scan- 
dal that it is still lying dismembered 
after the fire that recently destroyed 
almost the whole school chapeL 

The attempt to show drawings of 
twentieth century works is inevita- 
bly HmitBd. There is a telling horror 
of a student drawing by Lubetidn, a 
giant howitzer running with a flow 
of red water - a crude attempt to 
dramatise the horror of war in an 
animated memorial (mercifully 
never built). 



Tunnel opens to closed minds 


Music/ David Murray 

Berio’s progress 


T o celebrate the opening of the 
Suez Canal Verdi created his 
most popular work, Aida, first 
performed in Cairo in 1871 to great 
acclaim. To commemorate the most 
spectacular engineering, achieve- 
ment of tin twentieth century, the 
Channel Tunnel, we had, well, some 
really nice Kentish choristers sing- 
ing their hearts out in a tent 
It is a scandal, a striking expres- 
sion of loss of national nerve and 
ambition, that the artistic contribu- 
tion to the opening of the Channel 
Tunnel on Friday was so negligible. 
The finger must point at Alistair 
Morton, chairman of Euro Tunnel, 
who might have spared a borrowed 
mite from the billions invested in 
the Tunnel to create an occasion. 
The government, too, looks shabby 
and unimaginative, while local 
authorities, displaying their ambiva- 
lence to the project, pled poverty. 

Worse, there had been plans to do 
something interesting. There was 
going to be an arts festival. Impres- 
sive figure followed impressive fig- 
ure as festival director, first Luke 
Rittner, then Michael Nyman, and 
finally Gavin Henderson, who each, 
to their amazement, discovered that 
they had to raise the mtIHon or so 
needed themselves by going cap in 
hand to business and gov e rn m ent 
Things became more farcical with 
the delays in the opening. About the 
only new work inspired by the ven- 
ture, Michael Nyman's, TGV, actu- 
ally celebrates, not least in Its 
music, the French express train 
which makes British Rail look like 


Barkis and his cart It was first per- 
formed last autumn in T.iTte when 
the TGV linked Paris to the north 
French dty which had helped pay 
for the work, another embarassment 
for the British. 

Naturally any attempt to have a 
joint British-French artistic celebra- 
tion floundered. The French went 
their own way and the citizens of 
Calais an Saturday night were able 
to get drenched listening to a new 


There will of course be 
plenty more events for the 
Channel Tunnel to 
celebrate - the appearance 
of the first paying 
passengers for example. 
It should start planning 
now 


piece by Berio on the banks of a 
canal. The English concert was 
much more humble, but probably 
more enjoyable, the choirs of Ash- 
ford, Folkestone and Dover caning 
together with the few French singers 
that the Pas de Calais could spare 
for some choral favourites. 

There was one appealing oddity in 
the progra mm e, unearthed by con- 
ductor Mark Dellen “The song of the 
railways”, commissioned from Ber- 
lioz in 1846, by who else but the 
town of Lille, to celebrate the first 
coming of the train. It is a rousing 
piece of popular art, as catchy as an 
operatic chorus, and well worth this 
timely revival. Its disappearance is 
attributed to a disgruntled ci tizen 


stealing the parts before the second 
performance because he had not 
been invited to the celebratory balL 

But one musical footnote is hardly 
comparable to Aida. There will erf 
course be plenty more events for the 
Channel Tunnel to celebrate - the 
appearance of the first paying pas- 
sengers for example. It should start 
planning now. It could get advice 
from South East Arts which has 
done its best, by commissioning pho- 
tographic exhibitions on the theme 
of the Tunnel and forging artistic 
exchanges with France, to make 
something of this rare occasion 
when the eyes of the world are 
focused on its region. 

For Sonth East Arts feels 
neglected, and with justification. Its 
citizens receive much less arts 
expenditure per head from the Arts 
Council than anyone else in the 
country. The Council seems to think 
they can go to London for their artis- 
tic fix, a belief belted by a British 
Rail timetable. Still South East Arts 
is putting the Tunnel fiasco behind 
it and getting back to basics. 

It has just given Kent Opera a 
grant, a small sum bat one that will 
help Norman Platt's much admired 
creation, killed off by the Arts Coun- 
cil to universal opprobrium in 1989, 
to rise again, with performances of 
Benjamin Britten’s church parable. 
The Prodigal Son, opening in Bath 
on June 9th. A work by Purcell, per- 
haps even a masque, is planned for 
1995. 

Antony Thomcroft 


T he current South Rank cele- 
bration of Luciano Berio's 
music, “Renderings”, gave us 
a long concert on Thursday worth 
every minute devoted to his eleven 
Sequenze for virtuoso soloists. The 
Park Lane Group, who were respon- 
sible for it, must have been proud to 
field three former “PLG Young Art- 
ists” whose virtuosity yielded noth- 
ing to their international colleagues, 
among those the dedicatees of 
Sequenza VUI (violinist Carlo Chiar- 
appa) and Sequema XI (American 
guitarist Eliot Fisk). Time takes its 
toll; Berio turns 70 next year, and 
the performers who inspired his ear- 
lier Sequenze have mostly retired or 
died. 

There is no modem parallel for bis 
sequence of Sequenze, which 
stretches from 1958 to (so far) 1988. 
Intense, fantastical monologues or 
monodramas, they try the possibili- 
ties of their solo instruments includ- 
ing the unique persona and mezzo of 
Cathy Berberian, Berio’s first wife 
and creative partner ( Sequema UD 
to the limits, and then explore 
unheard-of new ones. Yet they aren’t 
primarily virtuoso trials; rather, 
they find the composer seeking to 
create rich, expressive mini-worlds, 
within the economy of means that 
using only one performer must 
entail . 

Few of his famous feliow-serialists 
of the 1950s and '60s ever seemed to 
share Berio’s passion for individual 
human sounds, articulations, ges- 


tures. The Sequenze take loving 
account of their live performers, 
though they set than extravagant 
challenges. Personalities are forced 
into the open at full stretch. After 
eighty-odd years in which self-effac- 
ing service to the score was the 
idealised Western standard, that is 
exciting to hear. Here there was no 
weak link in the chain; every soloist 
drew us into his or her particular 
manner and climate, and made 


The Sequenze take loving 
account of their live 
performers . . . After 
eighty -odd years in which 
self-effacing service to the 
score was the idealised 
Western standard, that is 
exciting 


Berio's points tell with personal 
force. It was a rewarding experience. 

A Marinating extra dimension of 
the sequence was nevertheless 
obscured: namely, the continuous 
development that it traces. In this 
concert it was chronologically jum- 
bled indeed, the Sequenze were 
listed without numbers or years, 
identified only by artist and instru- 
ment On programming grounds, 
probably the fractured order offered 
better contrasts; perhaps also Berio 
wanted us to find our feet with each 
piece on its own terms. 

S tiff this is a unique diary of a 
high-’6Gs composer’s progress: from 


arcane musical calculations plus 
Dadaist theatrical effects ( Sequenze 
IV) through cooller developments, 
more open to the unaided ear and 
more Steadily dr ama tised (VZZX), to 
the newest virtuoso explosions for 
scorching trumpet and luxuriant 
guitar (X and XI), which trail a lot of 
knowing history behind them. 
Though each can be heard as a bril- 
liant one-off study, they deserve the 
deeper perspective of way-stations 
along a thoughtful path. We don't, 
after all, listen to Haydn’s or Beeth- 
oven's series of quartets as if it made 
no difference when they were com- 
posed. 

This concert was prettily rounded 
off by Consequents, commissioned 
from Paul Roberts, a clever, shapely 
collage of excerpts from all the 
Sequenze soloists together. Satur- 
day’s concert offered something 
analogous but tighten the latest 
(number V) of Berio’s own Chemms 
expansions of some Sequenza, this 
time upon Fisk’s breathtaking guitar 
epic. Mixed impressions: the new 
orchestral tendrils, mostly harmonic 
and exuberantly scored, often swal- 
lowed up the central guitar that 
should focus them. 

Franker amplification for him 
should set it all in better order. The 
triumph of that concert was Berio’s 
1984 Vod, with the honey ed-but-acrid 
folk-lines of Aldo Bennici’s viola 
cushioned, titivated and twisted 
(Chinese whispers!) by Berio's opu- 
lent band. 


Ballet 

Square 

Dance 

cachet 

E nglish National Ballet’s 
amoebic existence this 
month - the company 
split for visits to small thea- 
tres - took one half (with an 
orchestra) to High Wycombe’s 
Swan Theatre this week. The 
especial cachet of the tour is 
the acquisition of Balanchine’s 
Square Dance. It is a stunning 
piece, with the conventions of 
American folksiness re- 
thought for ballet There was, 
in the staging of 1957, a “cal- 
ler” yapping through the 
Vivaldi and Corelli concert! 
which are the score. He was a 
pestilential bore, and has mer- 
cifully long been abandoned. 

As now mounted, and well 
presented and lit by ENB, cur- 
tain-rise reveals a luminous 
area containing six couples in 
simplest Balanchlnian dress 
against a cycloram a. The look 
of the stage, after the Ray 
monda grand pas which began 
the programme with dark 
draperies, chandeliers and 
mimsy costuming, was like 
cool water after a glass of trea- 
de-ish madeira. (The effect of 
the performances the same). 

The dance sets ont clean pat- 
terns, and there enter two 
principals - Hope Muir and 
Giuseppe Pi cone on Wednes- 
day afternoon. Square Dance is 
uncompromising in its clarity, 
and must be uncompromised 
in performance. I thought 
ENB’s dancers made a fine 
first shot at choreography 
which offers them discipline, 
ideals of physical acuity, and 
not a little gaiety. They look 
good. A little more physical 
drive will make them look bet- 
ter, bnt this is dance - marvel 
suits them and they seem 
proud and happy in it Hope 
Muir has the qualities of 
bright assurance her role 
needs; Picone. a young Italian 
recruit to the company, prom- 
ises marvels. Brave technique, 
a premier danseur’s physique 
and elegance of means, mark 
him as a talent to watch. In 
the nobly contemplative varia- 
tion which Balanchine added 
to the ballet for the tremen- 
dous Bait Cook (a solo also 
danced with memorable poetry 
by Sean Lavery), Picone 
showed just how gifted he is. 

The opening Raymonda 
grand pas also brongbt 
remarkable male dancing. 
Frederic Franklin has set this 
collection of Petipa variations 
very welL They are devilishly 
hard to bring off, and need 
grander forces than anyone 
bnt the Bolshoi or Kirov can 
field. ENB's dancers do an 
honest best, bnt it was the for- 
mer Kirov danse ur Dmitri 
Gruzdyev (now with ENB) who 
told the truth about its style. 
It is a matter of dignity and 
broad phrasing in movement 
Gruzdyev knows how to sus- 
tain interest in what is really 
a collection of academic 
diebte because his training is 
sprung from Raymanda's tra- 
ditions. Across the century 
since its first performance, 
Mood-lines from Sergey Legat 
(who created the role) to Gruz- 
dyev are still to be traced. 

This triple bill ends with 
Wayne Sleep's Savoy Suite. I 
was not enchanted by It at an 
initial showing last year. 

Clement Crisp 


ENB’s tour visits Crawley, 
Dartford, Darlington, Basing- 
stoke, during the next fort- 
night 


| \ INT£WA TIQNjii 1 1 

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• ■ 


■ BERLIN 

OPERA/DANCE 

Deutsche Oper Jost Meier’s new 
Dreyfus opera, with a libretto by 
George Whyte, opened last night 
and is repeated on May 11, 17, 25 
and 27. The cast is ted by Paul Frey; 
conductor is Christopher Keene. 
Repertory also includes Rfgotatto 
with Ingvar Wbcefl. Dar ffiegands 
HoHnder with James Morris and 
Julia Varady, Lohengrin with GOsta 
Wmbergh and Bdjarfs ballet Ring 
Round the Ring (341 0249) 

Staotsoper uiter den Linden Main 
event Is foe revival of Gram’s 1742 
opera seria Cleopatra e Cesare, 
conducted by Rend Jacobs and 
staged tv Fred Bemdt Repertory 
also includes Giselle, FkteHo with 
Eva-Marfa Bundschuh and Toeca 
with Anna Tamowa-Sintow (200 
4762/2035 4494) 

K o nw roh e Oper This month’s 
repertory includes three classic 
Kupfer productions: Gluck’s Orfeo 
starring Jochen Kowalski, 
Rimski-Korsakov's Tsar Saltan and 
Le nozze dl Figaro (22 9 2555) 
CONCERTS 


Schausplefhaus Tonight Leif Ova 
Andsnes piano redtaL Tomorrow. 
Odense Symphony Orches tr a plays 
works by Nielsen and Pettersson. 
Wed: Trondheim Symphony 
Orchestra and Berlin Radio Chorus 
in Grieg’s complete music for Peer 
GynL Thurs, Fri, Sat Michael 
Schoanwandt conducts Berlin 
Symphony Orchestra In Debussy, 
Berlioz and Brahms. Sun: La 
Stag lone baroque ensemble (2090 
2156) 

PhSharmonie Tonight Hugh Wolff 
conducts Bert to Radio Symphony 
Orchestra In works by Respighi, 
Jolivet and Walton. Tomorrow: RIAS 
Chamber Chorus gives world 
premiere of new work by Henze. 
Thurs: Pepe Romero guitar recital. 
Fit Chung Trio. Sat, Sun, next More 
GOnter Wand conducts Berlin Ratio 
Symphony Orchestra in Bruckner's 
Eighth Symphony (2548 8132) 
THEATRE 

The Theatartreffen, Berlin’s annual 
German-language theatre festival, 
runs dally tffl May 18 . Romeo and 
Ju8etfrom DGsseldort (tonight, 
tomorrow at Schflter Theater) and 
Othello from Schwerin (Wed, Thurs, 
Fri at Berliner Ensemble). Two 
productions of Ibsen's Hedda 
Gabien by Schauspiel Frankfurt 
at Berliner Ensemble tonight and 
Andrea Broth's Berlin staging at 

the Schaubtihne tomorrow. Wed, 

Fri, Sat and Sun. Tickets and 
^ formation from Berlin Festival 
office teBuda pester Strasse (2548 
9100) 


■ NEW YORK 

THEATRE 

• Passi on s; Stephen Sondheim's 
new musical based on Igino 


TarchettFs 1869 novel about a 
woman’s unrequited love for a 
handsome young army captain. 
Opens tonight (Plymouth, 236 West 
45th St, 239 6200) 

• AH In the Timing: six short plays 
by David Ives add up to one 
enchanted evening (John 
Houseman, 450 West 42nd St 239 
6200) 

• Three Tall Women: a moving, 
poetic play which has just won 
Edward Albee a Pulitzer Prize 
(Promenade, Broadway at 76th St 
239 6200) 

• Medea: Diana Rlgg gives a 
magnetic performance In this 
production of Euripides' tragedy, 
an Import from London's Almeida 
Theatre directed by Jonathan Kent 
(Longacre, 220 West 48th St 239 
6200) 

• The Rise and Fall of Little 
Voice: Hynden Welch portrays a 
painfully shy woman with a 
remarkable singing voice In this 
play by Jim Cartwright A 
St^ipenwotf Theatre Company 
production from Chicago (Neil 
Simon, 250 West 52nd St, 307 4100) 

• Angels to America: Tony 
Kushner’s two-part epic txxftros 
a vision of America at the edge of 
disaster. Part one is MQIennium 
Approaches, part two Perestroika, 
played on separate evenings (Waiter 
Kerr, 219 West 48th St 239 6200) 

• Four Dogs and a Bone: John 
Patrick Shantey's satiric comedy 
about movie-making and power 
plays in Hollywood (Lucille Lortet 
121 Christopher St 924 8782) 

• Broken Glass: set In New York 
to 1936, Arthur Miller’s new play 
is a compassionate study of 
paralysis in the face of crisis (Booth, 
222 West 45th St 239 6200) 


• She Loves Me: the 1963 Bock, 
Hamick and Mastsroff musical Is 

a delicate, unabashedly simple story 
with ad the humanity, integrity and 
charm that Broadway's 
mega-musicals lack (Brooks 
Atkinson, 256 West 47th St 307 
4100) 

• Damn Yankees: the big musical 
hit of 1955 is back, its jarringly 
updated production masted by the 
sporty energy of the cast and some 
lively new dance numbers (Marquis, 
Broadway at 45th St 307 4100) 

• Carousel: Nicholas Hytnerts 
bold, beautiful National Theatre 
production from London launches 
Rodgers and Hamm erst ein towards 
the 21st oentuiy (Vivian Beaumont 
Lincoln Cento 1 , 239 6200} 

• The Sisters RosenswMg: Wendy 
Wasserstein's most successful play 
to date, a comedy with serious 
undertones about the reunion In 
London of three American Jewish 
sisters (Ethel Barrymore, 243 West 
47th St 239 6200) 

DANCE 

MetropoGtan Opera American Ballet 
Theatre's Spring season runs daily 
except Sun tiB June 4. This week’s 
repertory Includes Kenneth 
MacMillan's Marion and a new work 
by Canadian-born choreographer 
James Kudelka (362 6000) 

State Theater New York City 
Ballet's Spring season runs daHy 
except Mon tfll June 26, with 
choreographies by Balanchine, 
Robbins, Mattes and Tanner. 

Mikhafl Baryshnikov wOl perform 
Jerome Robbins’ A Suite of Dances 
(Bach) tomorrow, May 13, 27 and 
29. The Diamond Project a biennial 
event dedicated to new neoclassical 
ballets, runs from May IB to June 
18 , featuring the work of Ulysses 


Dove. Richard Tanner, Robert La 
Fosse and nine other 
choreographers (870 5570) 

City Center Compania National 
de Danza. a Spanish modem dance 
troupe, makes its American debut 
tomorrow, and continues daily till 
Sun (581 1212) 

Joyce Theater Urban Bush Women, 
a group of musicians and dancers 
who explore contemporary and 
ancestral African themes, are in 
residence this week (242 0800) 
CONCERTS 

Avery Fisher Hall Tonight New 
Opera Orchestra and Chorus of 
Moscow present conceit 

performance of Glinka's Ruslan and 
Ludmila. Tomorrow. Andte Previn 
conducts New York Phifliarmonic 
Orchestra in works by Haydn and 
Elgar. Thurs, Fri morning, Sat, next 
Tues: Kurt Masur conducts 
aH-Beetftoven programme, with 
piano soloist Emanuel Ax. Fri 
everting, Sun afternoon: Daniel 
Barenboim conducts Chicago 
Symphony Orchestra in two 
programmes, including two Brahms 
symphonies said Elliott Carter's new 
Partita. May 18: Kiri te Kanawa (875 
5030) 

Carnegie HaU Thurs; Alfred Brenda! 
plays Beethoven piano sonatas. 

Sun afternoon: Dennis Russell 
Davies conducts American 
Composers Orchestra In works by 
Zwiiich, Bloom and Sessions (247 
7800) 

JAZZ/CABARET 

Blue Note Charles Lloyd Quartet 
and Bobby Watson & Horizon begin 
a week’s engagement tomorrow 
(131 West 3rd St near Sixth Ave, 

475 8592) 

Algonquin Hotel Andrea Mareowicci 
has embarked on an frying Baffin 


tribute in the Oak Room, mixing 
rarefy heard early pieces with 
d assies such as Cheek To Cheek 
(59 West 44th St 840 6800) 

Ba Broom Singer Michel Hermon 
and accordionist Gerard Bameaux 
move into the spotlight for the next 
two weeks with a Piaf-inspired 
programme (253 West 28th St, 244 
3005) 


■ PARIS 

MUSIC/DANCE 

Opera Bastffle A new production 
of Tosca, conducted by Spiros 
Aiglris and staged by Werner 
Schnoeter, opens on Fri and runs 
tiH June 17 with changing casts 
Including Carol Van ess, Piaddo 
Domingo (May 25, 27, 30) and 
Sergei Leiferkus (4473 1300) 

Op6ra Comique Don Pasquale 
Opens tomorrow for 10 
performances starring Gabriel 
Bacquier and Leonti na Vaduva (4286 
8883) 

Palais Gamier The OpOra Ballet 
has Rudolf Nureyev’s 1992 staging 
of La Bayadere daHy except Mon 
tin May 28 (4742 5371) 

Theatre des Champs-Bystes 
Ukraine Radio Symphony Orche s tra 
gives a concert tomorrow featuring 
works by Rossini, Verdi, Mozart 
and Prokofiev. Jean-Pierre Rampal 
gives a flute recital on Sun morning 
(4952 5050) 

JAZZ/CABARET 
Lionel Hampton Jazz Club 
Legendary soul singer Vernon 
Garrett is in residence this week. 
Music from 10.30pm to 2am. May 
16-28: Memphis blues singer Ann 
Peebles (Hotel Meridien Paris Etoile, 
81 Boulevard Gouvion St Cyr, tel 
4068 3042) 


ARTS GUIDE 

Monday: Berlin. New York and 
Paris. 

Tuesday: Austria, Belgium. 
Netherlands, Switzerland. Chi- 
cago, Washington. 
Wednesday: France. Ger- 
many, Scandinavia. 

Thursday: Italy, Spain, Athens. 
London, Prague. 

Friday: Exhibitions Guide. 

European Cable and 
Satellite Business TV 
(Central European Time) 

MONDAY TO FRIDAY 
IBC/Sisw Channel: FT Busi- 
ness Today 1330; FT Business 
Tonight 1730, 2230 

MONDAY 

NBC/Super Channel: FT 
Reports 1230. 

TUESDAY 

Euronews: FT Reports 0745, 
1315, 1545, 1815, 2345 

WEDNESDAY 

NBC/Super Channel: FT 
Reports 1230 

FRIDAY 

NBC/Super Channel: FT 
Reports 1230 

Sky News: FT Reports 0230, 
2030 

SUNDAY 

NBC/Super Channel: FT 
Reports 2230 

Sky News: FT Reports 0430. 
1730; 







14 


Samuel Brittan 


Treasury and Bank 
in halfway house 


Once upon a 

§ time 1 used to 
advise fellow 
economic jour- 
nalists that the 
sure way of 
securing promi- 
nence for an 
article was to 
say that there 
was a difference between the 
UK Treasury and the Bank of 
England - or if the writer 
wanted to be pedantic, a differ- 
ence of emphasis, as no two 
institutions ever entirely 
agree. This strategy will have 
to be reassessed, although not 
entirely abandoned, in view of 
the fact that the two organisa- 
tions have dipped their toes 
into the waters of greater open- 
ness. The right attitude now is 
one of qualified rapture tinged 
with irony. 

The first serious move, taken 
over a year ago, was the publi- 
cation of the Bank's indepen- 
dent quarterly Inflation 
Report, which the Treasury is 
now “only shown in its final 
fbrm n . Then last November the 
TBnnk was given discretion over 
the timing of interest rate 
changes - the substance is still 
decided by the chancellor. 
Finally, there was the decision 
to publish, after a gap of six 
weeks, minutes of the monthly 
Monetary Meeting between 
governor and chancellor. 

The plan to publish the min- 
utes has been around about a 
year. The final decision was 
not made until after the dis- 
agreement between chancellor 
and governor in February over 
the former’s proposals to cut 
base rates by l /i per cent When 
the chancellor saw that the 
minutes recording this could 
be published without disaster 
he recognised a test case and 
pressed the green light In fact 
the disagreement took a sec- 
ond day to resolve; and offi- 
cials toyed with the idea of pre- 
tending that the second 
meeting never took place until 
wiser counsels prevailed. 

The published minutes begin 
with an anodyne set of notes 
on recent developments based 
partly on the Treasury's own 
Monetary Report, which is pub- 
lished on the same day and has 
now been jazzed up in appear- 
ance. There then follows the 


SGVEPrtOR 
me^ts 
CHANCEUDft- 

M1NU7ES 
yPUBUSHED/f 


SECONDS out/ 



opening remarks of the gover- 
nor, Eddie George, set out 
fairly fully. Mr George makes 
sure of this by handing over a 
full set of his speaking notes to 
the Treasury secretariat 

After that comes the chancel- 
lor’s own assessment, often 
more briefly given. Here, how- 
ever, a minor element of fiction 
enters. For the chancellor, 
Kenneth Clarke, usually 
encourages the Treasury’s 
chief economic adviser. Prof 
Alan Budd. to lead off for the 
Treasury and comes in himself 
somewhat later. The rest of the 
discussion is given as a series 
of separate and unrelated 
points, not attributed to any- 
one. The final paragraph is 
called "Conclusion" and con- 
tains the chancellor’s sum- 
mary and decision. 

In fact there are quite a large 
number of people in the room 
during this bilateral meeting, 
including the Treasury's per- 
manent secretary, press advis- 
ers, and Sarah Hogg from the 
prime minister's office. This 
makes the preliminary meet- 
ing. between Treasury and 
Rank officials to prepare the 
gro und, all the more crucial; 
and one is assured that these 
discussions are more system- 
atic and less pomtiUiste than 
the chancellor-governor meet- 
ing. There are good hopes of 
the official anonymity being 
penetrated. For instance, at the 
February meeting, where the 
chancellor and governor dis- 
agreed over a base rate cut. 


Kenneth Clarke complained 
that the “advice” he received 
was too cautious, but in no 
way exempted his Treasury 
officials from this stricture. 

The UK minutes obviously 
follow the model of the Fed 
Open Market Committee, but 
do not go as for. For the Fed 
lists who voted for and against 
the final decision- But it is in 
London only where one person, 
has a vote - the chancellor 
(presumably the prime minis- 
ter can whisper in his ear). 

The timing of the monetary 
meeting - a day or two after 
the publication of MO figures - 
is itself a historical hangover. 
Hating from the time when the 
Treasury was stiff trying to use 
this aggregate, which consists 
almost entirely of notes and 
coins, as its mafo monetary 
target Now it is hut one of 
many indicators that are exam- 
ined. Indeed, the most impor- 
tant clutch of indicators, such 
as retail sales, more widely 
based money and credit, manu- 
facturing production, unem- 
ployment and earnings and 
producer and retail prices, all 
come out around the middle of 
the m onth. 

Obviously, the two main 
characters are role playing. 

Kenne th Clarke fully Intends 
to let Eddie George take the 
initiative when the issue is 
whether to raise interest rates. 
The governor, however, is not 
quite so reconciled to waiting 
for the chancellor to propose 
Interest rate reductions. The 
base rate cut of January 1993 
occurred, of course, before the 
publication of minutes. But it 
was triggered by the Bank’s 
concern over the snail’s pace of 
economic recovery. 

The more typical February 
1994 debate was resolved by 
making the base rate cut one 
of a quarter per cent This is 
fine, as for as it means smaller 
and more frequent changes, 
which could make monetary 
policy one degree less politi- 
cised. But it is for from fine if 
it means that disagreements 
are to be resolved by splitting 
the difference. Both in relation 
to Bank of England indepen- 
dence and in relation to 
greater transparency, the pre- 
sent arrangements are all too 
clearly a halfway house. 


TIMES MO NDAY MAY ■> 1<W4 

David Goodhart says the upward trend in UK ^ ^ ^ 

average earnings could be a matter for concern 


The pay demon 



W orkers at the 
cashmere spin- 
ning company 
Todd & Duncan 
in Kinross, Scotland, have just 
won an 85 par cent pay rise, 
more than three h men the cur- 
rent inflation rate of 23 per 
cent 

Fay rises such as this have 
contributed to the recent 
upward trend in UK average 
earnings. Last October, earn- 
ings were Increasing at an 
annual rate of 2.1 per cent but 
by February, the latest month 
for which figures are available, 
the rate bad readied 44 per 
cent 

But as pay-setting raters its 
busiest season in Britain, there 

is only a glimmer of anxiety 
among employers about the 
possibility of wage inflation 
j being spurred by the strength- 
ening recovery and decline in 
i unemployment 

The relaxed mood of Mr Nev- 
ille Barnes, personnel director 
at Todd & Duncan, is part of 
1 the explanation. Instead of 
managing 440 workers for the 
company's most hectic produc- 
tion period from February to 
September, as he did last year, 
he now has only 360 workers 
producing frhg saraft q unramf of 
cashmere. 

Pay for the 360 is now based 
on a system of annualised 
hours, which allows managers 
to cope more efficiently with 
the seasonal peaks and troughs 
of consumer demand, *«H obvi- 
ates the need to employ tempo- 
rary contract workers. “This 
way you can also reduce exces- 
sive overtime during one part 
of the year and short-time 
working at another,” says Mr 
Barnes. 

The 8^ per cent pay rise - a 
one-off reward for shifting to 
the new system - Is more than 
paying for itself through 
higher productivity, so labour 
costs per unit of output are 
lower than last year. 

Across manufacturing indus- 
try as a whole, unit labour 
costs are no longer faffing as 
they did for periods of last 
year, but they are scarcely ris- 
ing. Average earnings 
increases of about 45 per cent 
are being almost matched by 
productivity gams. 

According to the Confedera- 
tion of British Industry it is 
such gains that are driving up 
pay, flud not the slight upturn 
in inflation (now heading 
towards an annual 3 per cent) 
or even the recent increases In 
tax and national insurance 
contributions. 

Nevertheless, the slight rise 
in pay settlements and the 
likelihood that unit labour 
costs across the economy as a 
whole will increase by at least 


3 per cent this year is causing 
some concern among employ- 
ers. 

“There is a danger that the 
old Inflationary habits will 
reappear as the recovery gets 
under way," says Mr Ian 
Thompson of the Engineering 
Employers Federation. 

Even small increases in unit 
labour costs may be bad news, 
he says. “To remain competi- 
tive in some sectors you need 
falling unit labour costs so you 
can pass ou lower prices or 
higher Quality to the cus- 
tomer.” 

The CBI, too, which was 
recently claiming that British 
pay-setting was now more dis- 
ciplined than Germany's has 
done an about-fece. After a 
period of pay laxity induced by 
unification, German unit 
labour costa are now foiling, 
and Mr Howard Davies, the 
CBTs director-general, wains 
that “other countries in 
Europe are now tackling their 
cost competitiveness in a deter- 
mined way”. 

Whfle employers are not yet 
talking about a new wage-price 
spiral, they are markedly less 
<q»ngninp than the government, 
which continues to claim that 
inflationary pay bargaining - 
and even the annual pay rise - 
is a thing of the past 

The chancellor, Mr Kenneth 
Clarke, last week celebrated 
the steady decline in collective 
bar gaining (which now covers 
fewer than half of all employ- 
ees) and the idea of the “going 
rate”. 

“It has taken over a decade 
for both employers and 
employees to accept that an 
annual pay rise need not be 
inevitable,” he said. 

Inflation mntjmiBs to set a 
floor beneath pay rises for the 
large majority of employees, 
however. And, as Mr Kevin 
Gardiner, an economist at Mor- 
gan Stanley, the US invest- 
ment bank, says; “Real wage 
growth has been substantially 
strong er during this recession 
than during the last.” 

The low absolute level of 
earnings increases has dis- 
guised the fact that, relative to 
inflation, wage growth contin- 
ued strongly through the reces- 


sion. According to Mr Gar- 
diner, real disposable earnings 
rose only 08 per cent in 1980-82 
but 7.8 per cent in 1991-93. 

“Employers and employees 
are tacitly colluding, at the 
expense of the unemployed, to 
keep wages and prices higher 

‘Employers and . 
employees are 
tacitly colluding, 
at the expense of 
the unemployed’ 

and output lower than it could 
be," be says. 

Events at Todd & Duncan, 
where 80 jobs (albeit seasonal 
ones) have gone, appear to sup- 
port this view. 

The Rank of En gland, too, 
warns the government that the 
UK’s pay-setting system 
remains biased a gains t employ- 
ment -creation. In its latest 
inflation report, the Bank 


writes: “Wages are still strik- 
ingly unresponsive to changes 
in unemployment Either the 
labour-market reforms have 
yet to bear fruit, or other 
forces of inertia are at work to 
offset them. 

“The most important factor 
preserving the bargaining 
power of employees may be the 
scarcity of their skills and an 
unwillingness to recruit from 
the ranks of the unemployed 
. . . those in work, whether 
members of unions or not, will 
still be able to push for real 
wage increases that, in aggre- 
gate, keep others out of work.” 

Skill shortages helped to 
stimulate wage inflation in 
some sectors at the end of the 
1980s, and there are some signs 
that they are now returning. ' 
According to a recent Depart- 
ment of Employment survey, 
17 per cent of employers felt 
that the s kills of their existing 
workforces were inadequate to 
meet business objectives. 

But there are more prosaic 


drift in pay. Last year pay 
negotiations wore dominated 
by a continuing decline in 
inflation, stubbornly high 
unemployment and a L5 per 
cent pay policy in the public 
sector. 

This year none of those con- 
ditions applies. Inflation is ris- 
ing slightly, unemployment is 
falling, and despite the overall 
pay bill freeze in the public 
sector, most workers will 
receive rises of dose to 3 per 

IWlf 

Further, as Mr Bill Cal- 
laghan, the chief economist at 
the Trades Union Congress, 
points out, many workers wtu 
try to claw back the effect of 
income tax and national insur- 
ance increases this year 
through higher pay. One 
recent two-year pay deal - at 
the tractor maker Massey Ferg- 
uson - has recognised the 
effect of the tax increases by 
giving a higher rise this year 
than next 

the scope for clawing back 
die effects of tax rises is proba- 
bly limited, however. Many 
economists expect earnings to 
rise by just over 4 pea: cent in 
1994 with inflation at just over 
3 per cent for the year. But the 
combined tax rises will cut 
income by more than 2 per 
cent, leaving a net reduction in 
income of more than 1 per 
cent 

T he final factor contri- 
buting to the pick-up 
In pay Is the tenacity 
of “pay drift" - the 
gap between what is agreed in 
settlements, still running at 25 
to 3 per cent, and actual earn- 
ings increases, running at 
about 4 per cent 
Overtime payments are usu- 
ally an important part of tits 
gap but overtime is falling at 
present. Bonuses and profit- 
sharing, especially in the 
Unnnrini services sector, may 
be a more relevant explanation 
for “pay drift” and may tie 
behind the jump in service sec- 
tor earnings from 3J per cent 
in January to 4.8 per cent in 
February. Some economists 
worry that whatever the bene- 
fit of an increase in perfor- 
mance and profit-related pay, It 
may bring the cost of perma- 
nent upward pressure on earn- 
ings. 

Thus the message to employ- 
ers from organisations such as 
the CBI is: do not fritter away 
the competitive gains of the 
past few years. 

Mr Robbie Gilbert, employee 
relations director at the CBI, 
concludes: “Given our history, 
one can never be confident 
that our pay problems are 
behind us.” 



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LETTERS TO THE EDITOR 


Number One Southwark Bridge, London SE1 9HL 

Fax 071 873 5938. Letters transmitted should be clearly typed ana not hand written. Mease set fox for finest resolution 

Erroneous ‘folklore’ on consultants’ value 


From Sir Peter Leoene. 

Sir, There are some errone- 
ous assumptions being peddled 
as part of an emerging folklore 
about the UK government’s 
use of external consultants. I 
would tike to put some more 
balanced points down for the 
record. 

Over the past io years there 
has been a significant increase 
in the use of external consul- 
tants by the public sector. But 
“consultancy” is a very diffi- 
cult activity to define and 
many of the blurred bound- 
aries have found their way into 
the assumptions which have 
been incorrectly matched up in 
recent articles In the press. 

The government is a signifi- 
cant purchaser of external 
advice and does spend a con- 
siderable amount in this area, 
as it does on research and on 


purchasing contracted ser- 
vices. ft is, therefore, impor- 
tant and timely to be looking 
at the use of external consul- 
tants so that the government 
can be sure the best value for 
money is being obtained. In 
seme cases, the money is well 
spent; in others we are not so 
sure. The Efficiency Unit scru- 
tiny team is examining 
whether the purchasing of 
external advice can be 
improved. Are there best prac- 
tices developed in some areas 
of government which might be 
shared more widely? Are there 
management systems which 
might be put in place to assess 
benefits and value for money 
in a more quantifiable way? 
These and other questions are 
part of the team’s brief. 

Different sources of advice 
should not be seen as being 


mutually exclusive. They can 
be complementary, with the 
government purchasing exper- 
tise which does not reside 
within the public sector. At 
other times drawing on a dif- 
ferent range of experience 
would be prudent and desir- 
able. 

Many consultancies are, of 
course, not aimed at producing 
savings, though in the long 
run savings may be achieved. 
One could cite here improving 
customer services, developing 
training systems and designing 
strategic management systems. 
These lead to benefits but they 
are not always quantifiable 
under a direct bookkeeping 
type “savings" heading. It 
would be foolish indeed to 
expect government to put a 
rigid strait) acket over the deci- 
sion-making process, and insist 


that only one source of advice 
should be considered valid 
expenditure of the taxpayer’s 
pound. 

Tills is a good time to take 
stock and to look at the value 
for money obtained from using 
external consultants. But it is 
much more helpful if this 
debate takes place on the basis 
of a final report, with the sup- 
porting data assembled and 
displayed, rather than at ah 
intermediate stage when not 
all of the evidence has been 
assembled and when the report 
is still some way from reaching 
final conclusions. 

Peter Levene, 
prime minister’s 
adviser on efficiency. 

Efficiency Unit, 

Cabinet Office, 

70 Whitehall, 

London SWIA 2AS 


Repairing the fault line 


VAT answer to late payers 


From Mr Walter Grey. 

Sir, It hardly needed the lat- 
est Tory tiff over a sin gle Euro- 
pean currency - a natural cor- 
ollary of the single European 
market already in being, but 
still a remote prospect - to 
drive home Philip Stephens’s 
point about the re-emerging 
“Tory fault-line over Europe” 
(“The dock starts to tick for 
Major”, April 80). 

We have, of course, had 
other alleged fault-lines, nota- 
bly wftb regard to the Euro- 
pean Exchange Rate Mecha- 
nism (though here, In the 
events leading up to Black 
Wednesday, Britain’s own 


behaviour was at least as 
much at fault as anything 
else). But the real fault-line in 
British politics now, it seems 
to me, runs through No 10 
Downing Street, whose occu- 
pier - to adapt a remark about 
an earlier ruler by the Roman 
historian Tacitus - seemed 
eminently fit to hold the job 
that goes with it had he not 
done so. Clearly, it is up to the 
Tory party itself, in the first 
place, to repair that basic 
shortcoming: 

Walter Grey, 

12 Arden Road, 

Ftnchteu. 

London N3 SAN 


From Mr R V Simons. 

Sir, One aspect to the late 
payment of bills which seems 
to have received little attention 
is the effect of VAT. 

Large companies remit to 
Customs & Excise each month 
the difference between tbe 
VAT which they have charged 
(output tax) and that which 
they have been charged (input 
tax). If they get paid before 
they pay their suppliers (for 
example, retailers). Customs & 
Excise tops up the benefit to 
their cash-flow by crediting 
them with the VAT on invoices 
which they have not in tact 
paid. 


This suggests a simple lever 
which the chancellor of the 
exchequer could use to encour- 
age prompt payment of bills: if 
a company regularly fails to 
pay Its bills within 30 days it 
should be switched to a more 
onerous VAT regime. Output 
tax would still be due to Cus- 
toms & Excise based on tax 
point but input tax could only 
be claimed in respect of bills 
actually paid. 

R V Simons, 

Robert Simons, 

Perth House, 

Soulbury Road, 

Leighton Buzzard 
LU7 7RN 


Costings on works councils exclude a number of obligations 


From Mr Graham R Mackenzie. 

Sir, Bert Tbierron, general 
secretary of the European 
Metalworkers’ Federation 
(Letters, April 29), has let the 
cat out of tbe hag. His mating* 
for the 190 European works 
councils meetings EM F ha s 
organised are similar to KEF’S. 
The similarity ends If you 
know that EMF's costings 
exclude the pay of workers’ 
representatives to attend meet- 
ings, advisers’ costs, manage- 
ment attendees’ time and costs, 
and all the costs of preparation 
and reporting back. The obliga- 
tions imposed on a company by 
the current proposal involve 
far greater expense than the 
meetings EMF has organised. 


as it well knows. We believe 
our estimate of up to £250,000 
per meeting may well be con- 
servative. 

Mr Thierron also chastises 
Unice, the European employ, 
ers' organisation, for suggest- 
ing that works councils would 
delay decision making He says 
many existing European works 
councils agreements provide 
for consultation procedures 
and there have been no 
reported delays. How odd then 
that the European Trades 
Union Congress's own case 
study should conclude ■ that 
“most arrangements provide 
only information, typically cov- 
ering corporate strategy” and 
“consultation Is rare and nego- 


tiation is non-existent”. Euro- 
pean business should be aware 
of tbe trade union objective. 
ETUC. to which EMF belongs, 
passed a resolution in 1988 on 
European works councils, 
which called for “the right for 
workers’ representatives (trade 
unions] to obstruct any deri- 
sions which are taken without 
prior negotiation". 

Effective Information and 
consultation of employees is 
vital for any business. The 
Commission’s own research 
shows that there is no single 
solution. Multinationals have 
different methods of infor ming 
and consulting employees, 
reflecting domestic circum- 
stances and cultural differ- 


ences. These should be encour- 
aged with no threat of standar- 
dised and centralised models 
being imposed by legislation. 

EEF calls on member states 
to reject the latest Commission 
proposal on European com- 
pany committees, if member 
states are intent on pursuing 
this legislation, they should lis- 
ten to the concerns expressed 
by companies and accept 
amendments to the prop osal 
put forward by Unice, EEF and 
other employer bodies. 
Graham R Mackenzie, 
director-general. 

Engineering Employers’ Federa- 
tion, 

Broadway House. 

Tothill Sheet. London SWl 







FINANCIAL TIMES MONDAY MAY 9 1994 


15 


FINANCIAL TIMES 

Number One Southwark Bridge, London SE1 9HL 
Tel: 071-873 3000 Telex: 922(86 Fax: 071-407 5700 

Monday May 9 1994 


Growth and 
the Tories 


Tbs economy must provide some 
of the few rays of hope left for 
Britain's prime minister. But will 
it be enough to save him and the 
Tories? Two questions arise: first, 
what sort of growth will be deliv- 
ered in the near future and, sec- 
ond, will this satisfy the voters? 
Unfortunately for the government, 
growth is unlikely to be impres- 
sive enough to win back its sup- 
porters. 

Recent evidence does show a 
steady recovery, with low infla- 
tion. Gross domestic product grew 
by 0.7 per cent in the first quarter 
of this year to regain its pre-reces- 
sion peak of four years ago. Unem- 
ployment is faiHng ; while underly- 
ing inflation is at its lowest for 25 
years. This is good news, but it is 
less encouraging on closer inspec- 
tion. Much of the growth in GDP 
was due to a surge in North sea oil 
and gas production, while output 
of manufactures is still 4.2 per 
cent below its peak in 1990. The 
foil in unemployment stffl. leaves 
2.72m people out of work; the jobs 
that have been created in the 
recovery have tended to be 
part-time or self-employed; and 
the number of employees in 
employment has fallen 

The greatest uncertainty con- 
cerns the effects of last month’s 
tax increases. If consumers were 
to take fright, the UK’s largely 
consumer-led recovery could be 
checked. Early evidence is incon- 
clusive. Consumer confidence was 
near to a record low in April 
according to a Gallup poll, but 
this report is at odds with official 
data on consumer spending. Retail 
sales grew rapidly in March and 
were up by 3A per cent on a year 
earlier, while narrow money, nor- 
mally regarded as a good coinci- 
dent indicator of consumer spend- 
ing, increased by Si per cant in 
the year to April. Lending by 
banks and building societies 
expanded rapidly In March. But 
much of this was due to lending to 
the financial sector, w hile borrow- 
ing for personal consumption 
remained weak. 


rates of 4 per cent or more for 
successive years between 1986 and 
1988, only to be pummelled by a 
long recession, voters feel cheated. 
What is more, although output 
has reclaimed Us pre-recessionary 
peak, it is still well below levels 
people expected before the reces- 
sion. Worse still, despite the recov- 
ery, real personal disposable fell 
in the third quarter of last year 
and grew by a paltry 0.1 per cent 
in the fourth quarter. 

Taken fright 

Even though the public at large 
has barely registered the recovery 
so far, financial markets have 
already taken fright. The contin- 
ued rise in bond rates - now two 
percentage points higher than dur- 
ing the trough at the turn of the 
year - shows that investors at 
least believe recovery is well-es- 
tablished. They also expect infla- 
tion to start rising- The gap 
between yields on index-linked 
and conventional gifts, which is a 
good indicator of inflationary 
expectations. Is op by more than 
one point since January, to 4.7 
percentage points. 

These fears are probably exag- 
gerated. Underlying inflation is 
quite low. Import prices, producer 
prices, pay settlements and unit 
wage costs all remain subdued. 
There is also spare capacity in the 
economy, the fatorwatumai Mone- 
tary Fund estimates an output gap 
of 4-5 per cent. If correct, this 
should allow the UK several years 
of non-infiationary growth. The 
only significant indication of a 
pick-up in inflation is the rise in 
the rate of growth of average earn- 
ings.. This increase, from 3.0 per 
cent in November to &25 per cent 
hi both December and January, 
Indicates that the troi^jh in earn- 
ings Has passed. 

Financial mariMb; may turn out 
to be in an unjustifiable tizzy, but 
lack of credibflzty is itself a con- 
straint on policy makers. They 
may be forced to raise short-term 
interest rates for earlier than they 
would like. Yet even if economic 


Satisfy public 
All in all, the recovery is Hkely 
to weather the tax rises and the 
government forecast of 2% per 
cent growth in the economy this 
year is also likely to be met The 
problem for Mr Major is that this 
may not be enough to satisfy the 
public. After enjoying growth 

Jobs agenda 
for Europe 


growth can be sustained at pres- 
ent rates, the necessary increase 
in taxes will stffl. prove unpopular. 
The rise in pre-tax real wages 
must also remain modest, if 
increases in employment are to be 
sustained. In short, dissatisfaction 
is bound to remain rife, which is 
not good news for Mr Major and 
the Tories. 


[to focus attention an everything 
s to focus it on nothing. This, 
ilong with an unwillingness to 
»nfront grim choices, has been 
he biggest failure of the European 
Jnion’s response to its employ- 
nent problem. The White Paper 
m growth, competitiveness and 
imployment, discussed at the 
Brussels European Council last 
December, was one example. 

Another is a report last week 
rom the UK's House of Lords 
elect committee on the European 
Communities. Few stones that 
night conceal ah idea or a new 
»rogramme have been left 
m turned. The result is not so 
nuch wrong, as unhelpful. 

European economic growth is 
tot the burning issue: over the 
ast 20 years, it has compared well 
nth that of the US. Nor is ft Euro- 
lean competitiveness: in relation 
o an entire economy this concept 
acks much meaning. Nor is it 
wen European macroeconomic 
toUcy: misguided though it has 
eoendOy been, this too shall pass, 
[he issue is that, over the past 20 
rears, growth in employment has 
ieen exiguous, while the overall 
ate of unemployment in the Euro- 
lean Union has risen, cycle by 
lyde, and now stands dose to 12 
ler cent. This is the uniquely 
European disease, one that has 
teeply infected social and political 
ife. 

The defect of the White Paper 
fas that it provided neither a 
ocused discussion, nor dear anal- 
rsis, nor strong policy recommen- 
[a tiffins. The House of Lords report 
ails to remedy these defects. It 
ecognises that neither lack of 
jrowth nor loss of competitiveness 
m their own are sufficient to 
ixplaln the comparatively high 
evel of structural unemploy- 
oast". But it avoids the central 
[uestioo, w hich is whether and, if 
o, how greater job creation can 
le reconciled with Europe’s much 
rized regulatory, tax and welfare 


jmmendabfy blunt 

[he latest World Economic Oufc- 
ik from the IMF shows what is 
eded. It Is commendabfy blunt 
fofle some policies to increase 

i flexibility of labour markets 
ve recently been adopted in 
rope," wrote the IMF, "most of 
se measures attempt to correct 
tortious atomizing from labour 


market regulations rather than to 
change the regulations them- 
selves.” A dose parallel to such 
tinkering can be found in the EU*s 
approach to reform of its common 
agricultural policy, with its set 
jisirifis and similar command and 
control m fidianiKnui , Just as fee 
CAP has created butter moun- 
tains, so labour market interven- 
tions have created of 

surplus labour. 

Irrelevant remedies 

What then is to be done? First, 
attention must not be diverted to 
irrelevant remedies. French expe- 
rience has, for example, demon- 
strated that tr aining Is insufficient 
to lower unemployment if mini- 
mum wages are too high. Simi- 
larly, Europe’s investment rates 
have been above those in the US 
and, even so, its jobs record has 
been for worse. 

Second, overhaul of labour mar- 
ket regulations and tax and bene- 
fit systems must be given pride of 
place The bulk of the long-term 
unemployed are to be found 
among the low skilled. There is no 
mystery about why this is so. 
These people are discouraged from 
seeking work by the generous ben- 
efits they receive when they do 
not work and by the high rate at 
which benefit is withdrawn when 
they do. Simultaneously, employ- 
ers are discouraged from offering 
work by the cost of labour, partly 
determined by the taxes and 
charges they have to pay. not to 
mention the regulations that gov- 
ern their ability to manage their 
labour forces flexibly. 

Analytically, the solution Is 
dear. It is to reduce the wedges 
between what it costs an employer 
to employ someone and the bene- 
fit an employee derives from 
obtaining such employment. This 
can be done by radically reform- 
ing the subsidy regime, to pro- 
mote employment. It need not 
necessitate the muling of benefits. 

Without radical action, Euro- 
pean. countries are accepting the 
persistence of high unemploy- 
ment. That may be their least bad 
choice, given political constraints- 
ft so, policy-makers should at least 
be honest about what they are 
frying - They must not be allowed 
to pretend that today's bloated 
policy agenda will do much to 
eradicate Europe’s unemployment 
black spot. 













m 


Home-grown businessmen such as soda pop boss Zdenek Svehla (left) and textile plant head Lubomir Smejkal are driving economic growth In the Czech Republic 

Old ways hamper 
new prosperity 

Entrepreneurs in the Czech Republic are being held 
back by a shortage of capital, says Christopher Parkes 


M r Jlri Pospisil, a 
director at the 
Czech National 
Bank, seems a 
hard man to 
please. He says he is puzzled by 
industry's “slow" response to grow- 
ing domestic demand. Although 
exports from the Czech Republic 
rose 23 per cent last year, he is 
disturbed about a 10 per cent rise in 
imports. “Perhaps the bank should 
talk to the companies to get a 
dearer picture,’' he suggests. 

He might start with Mr Ar man do 
Tatar, feist; founder of a small, 
two-year-old contact lens maker in 
Brno, the republic's second city and 
oldest industrial centre. He com- 
petes with “western quality at 
rypph prices” a gainst three state- 
owned operations. “If I had the 
money," he says of his moribund 
but dominant competitors, “I would 
buy them." 

But local banks want loan secu- 
rity of between 100 and 200 per cent 
and even then demand interest of 
up to 18 per cent, he says. Foreign 
hanks are tittle use. “They are only 
interested in foreign investors, not 
in us. They -always say *we cant 
assess the Czech risk’." 

Risk is one thing, but as Mr Pos- 
pisil acknowledges, the lack of a 
fully convertible currency - some- 
thing only the Central hank and 
government can correct - is a big 
obstacle to the establishment of an 
afffaiant primary market and to the 
flow of foreign funds to finance eco- 
nomic revival. 

Mr Zdenek Svehla, boss of 
Prague’s Zfitka soft drinks com- 
pany, privatised in mid-1992 with a 
ifwissni loan at a relatively gener- 
ous 14 per cent, agrees that raising 
capital is the entrepreneur’s worst 
problem. But Czech customers' ten- 
dency to ignore invoices is a dose 
second. “If we could collect 50 per 
cent of our receivables we would 
have no worries," he says. 

Z&tka’s only present recourse is 
to stop deliveries. Prague lawyer Mr 
Bohns lav Klein says a company 
seeking redress has to wait five 
years for a hearing in the over- 
loaded courts. Hence same adopt 
more unconventional approaches. 


he says: “Pay by Tuesday or bum 
on Wednesday ” for example. 

While shortages of capital a nd the 
inadequacies of the legal system are 
serious obstacles to development, 
they are not insuperable. Mr Tatar, 
for example, was helped by acquain- 
tances in the German optometries 
business, who gave hhn machinery 
on a pa y-when-you-can basis. 

Mr Lubomir Smejkal. c hairman of 
OMB. a busy tex t iles plant in Bmo, 
has a more formal agreement with 
customers in Germany and Austria. 
Days before his old, state-owned 
employer closed on December 31 

1991, he and his colleagues took 
with them their know-how, cus- 
tomer address books and the 
machinery to keep on producing 
their range of work wear and camp- 
ing equipment. Production restarted 
on January 2 1992. 

Valuing this source of western 
quality goods at Czech prices, OMB 
customers funded th» purchase of 
sewing and other machinery on a 
pay-as-you-go basis. “At the end of 
this year it’s all ours,” says Mr 
Smpjkal- QMB also ha« access to 
foreign hank credits secured against 
customers' guarantees of payment 
and, since all output goes to Austria 
and Germany, there is no trouble 
with late or non-payment. 

In an economy where old ways 
persist - turnover Is still equated 
with production by some - OMB 
seems a model of capitalist correct- 
ness. Mr Smejkal niaik* KcsUim pre- 
tax profit on sales of Kcs20m in 

1992. Last year, when turnover 
soared to Kcs4&2m, profits were 
reduced to Kcs500jM0 as earnings 


were ploughed into new machinery. 

In the first quarter of the current 
year OMB made Kcs2.3m pretax 
profit on sales of KcslLSm, and Mr 

Smejkal is now ennfirient enoug h to 

consider braving non-payers in the 
domestic market: “We might be 
ready to try selling here by the end 
of this year.” 

But OMB has yet to win complete 
control over its destiny. Its offices, 
workshops and stores are in a cor- 
ner of a giant state-owned weaving 
mill. Rent is a mere Kcs750,000 a 
year, but OMB’s tenure could be put 
at risk by the outcome of negotia- 
tions for privatisation of the mill, 

B ayerische Vereinsbank. 

provider of DM200.000 in 
credit lines, has prom- 
ised to help find a way 
out if OMB must set up 
in more expensive quarters. When 
pressed, Mr Smejkal says he may 
surrender a stake in OMB to "our 
German friends” as a last resort 
But “management interference” is 
unacceptable, he fn«d«hc 
His attitude reflects rising 
self-confidence among new entre- 
preneurs, whose private businesses 
now account for a guesstimated 50 
per cent of gross national product 
They are driving growth, forecast at 
a real 3£ per cent this year after 
four years of decline. 

Mr Smejkal’s resistance to outside 
“interference” reflects resentment 
against the waves of wheeler-deal- 
ers - known locally as “Johnnie 
Walkers” - who swept through in 
the early days of economic reform. 
Mr Smejkal 's rejection of outside 


management also reflects a feeling 
that the neighbours' influence is 
already deemed strong enough. Mr 
Stephen Bligh. a partner in KPMC’s 
Prague office, says in terms of num- 
bers of investors Germany will 
“inevitably^ be the biggest foreign 
business presence in the republic. 
Apart from heavy-hitters such as 
Volkswagen, which has a 30 per 
cent controlling stake (plus further 
options) in the Skoda car business, 
hundreds of smaller companies 
have “infiltrated” the country. 

Although real economic growth is 
expected to start this year, the 
republic’s “industrial Wirtschaft- 
sunmdef' has yet to materialise, he 
says. The second stage of privatisa- 
tion is due shortly and should be 
complete in two years, he reckons. 
Restructuring will last another five. 

There are signs this phase will be 
painfuL It is a measure of the suc- 
cess of the private sector so for that 
it has absorbed almost all workers 
displaced by privatisation. National 
unemployment is less than 4 per 
cent and nfl in industrial centres. 

But there is an awareness of a big 
overhang Of hidden unemp loyment 
in the utilities , chemi cals, agricul- 
ture and other state industries 
which remain to be sold ML Local 
experts say the brat workers and 
managers from these businesses 
have already left for new jobs, and 
there are few opportunities for the 
unskilled residue. 

Meanwhile, shortages of skilled 
labour and management are appar- 
ent The ABB-PBS boiler works in 
Brno, taken over last year by the 
Swedish-Swiss group, Asea Brown 


above local engineering rates to 
attract talent. Lawyer Mr Klein 
says Prague-based managers can 
already earn as much as their Ger- 
man counterparts and a secretary' 
can earn two-thirds more than the 
national average wage. 

Although overall labour costs are 
still low, the new Czech capitalists 
can see this gives them only a tran- 
sient competitive edge internation- 
ally and none domestically. 
Increased productivity and quality 
are now the goal. 

At ABB-PBS. chief executive Mr 
Richard Kuba plans In three years 
to thin, the workforce of 4.000 to 
3,200 while expanding volume out- 
put three-fold and matching the par- 
ent's quality standards. 

At the other end or the scale, the 
strategy at Mr Tatar's eight-man 
lens factory bears some hallmarks 
of that at ABB. High quality means 
he must pay high prices for 
imported German raw materials, 
and high wages for skilled labour, 
he says. “If i am to sell at the same 
prices as the state factories I need 
much higher productivity.” 

The quality/price relationship is 
also crucial to Zatka’s approach in 
the soda pop trade. “We base our 
future on the quality of our prod- 
ucts.” says Mr Svehla. That depends 
on fruit concentrates shipped from 
Israel and Greece. 

Although he competes against 130 
indigenous companies and foreign 
invaders which together can 
quench the national thirst twice 
over, Mr Svehla has few qualms. He 
can beat the locals on quality, he 
says. As for newcomers Coke, Pepsi 
and Schweppes, he accepts “we will 
never beat them on image or vol- 
ume", but Z&tka products are 50 per 
cent cheaper. 

Without access to the imports 
which seem so to irritate the cen- 
tral bank, Mr Svehla and Mr Tatar 
would have been hard-pressed to 
compete and stay in business. They 
may tell Mr Pospisil, should he call, 
that access to imported capital on 
reasonable terms may also give 
home-grown entrepreneurs the 
opportunity to build on their mod- 
est beginnings. 


Dollar policy still lacks consistency 


"My administration is setting a 
medium-term goal of stable prices - 
zero inflation. We betieoe a further 
reduction in inflation is the best way 
to secure higher living standards 
and a sustained reduction tit unem- 
ployment To this end, toe would wel- 
come an appreciation of the dollar. 
We are 100 per cent behind the Fed- 
eral Reserve in its efforts to prevent 
the economy overheating and protect 
the currency. We accept that a sub- 
stantial further rise tit short-term 
interest rates may be required." 

T his imaginary statement is 
the kind of signal that Presi- 
dent Bill Clinton needs to 
send if financial markets are fully 
to regain confidence in the conduct 
of US economic policy. To have 
maximum effect it would need to be 
swiftly followed by a half or - bet- 
ter stm - a full percentage point 
increase in short-term interest 
rates. Markets might then believe 
that the Clinton administration 
puts the same priority on price and 
exchange rate stability as most 
other governments. 

Needless to say, no such state- 
ment was forthcoming from the 
Oval Office last week. But the US 
Treasury did offer markets half a 
loaf. When the Fed and 16 other 
central banks joined forces to sup- 


port the dollar last Wednesday, Mr 
Lloyd Bentsen, the Treasury secre- 
tary, issued a statement sharply dif- 
ferent in tone from previous pro- 
nouncements. He said the 
administration saw “no advantage 
in an undervalued currency," sig- 
nalling for the first time a concern 
about the level of the dollar rather 
than its rate of c han ge. 

By contrast, the previous Friday, 
be had stuck to the old formula that 
intervention was needed to counter 
“disorderly markets” - a code 
meaning the Treasury wanted cal- 
mer trading conditions but was not 
trying to alter the direction of cur- 
rency movements. As such it was 
an invitation to markets to renew 
their attack cm the dollar. 

Mr Bentsen’s recantation - 
orchestrated by Mr Larry Summers, 
the Treasury undersecretary - is 
regarded within the US Treasury as 
a bold departure from previous pol- 
icy. By explicitly saying he did not 
want an undervalued currency, Mr 
Bentsen was attempting to put a 
floor under the dollar. 

Yet it makes little sense to take a 
strong position on the dollar with- 
out also adopting a consistent line 
on interest rates. Intervention is 
rarely successful unless backed by 
more fundamental policy shifts. 
One of the principal reasons why 



MICHAEL PROWSE 

on 

AMERICA 


the dollar has been weak recently is 
that financial markets regard US 
monetary policy as significantly 
looser than that in Europe and 
Japan, once allowance is made for 
countries' different positions in the 
economic cycle. 

The US has entered its fourth 
year of expansion and is rapidly 
approaching capacity limits; else- 
where output is for below potential 
because other countries are still 
struggling' to emerge from reces- 
sion. Yet real interest rates are 
lower in the US than in either Ger- 
many or Japan. 

The administration was annoyed 
in early February when the Fed sig- 
nalled the first increase in 
short-term interest rates in five 


years. It did not think a tightening 
of policy was then required and it 
only grudgingly accepted subse- 
quent rate increases. The White 
House blamed the Fed for soaring 
bond yields and turmoil in the mar- 
kets. Belatedly, administration offi- 
cials are now perhaps beginning to 
grasp the political advantages of 
slowing growth this year so as to 
prolong the economic expansion 
until election day in 1996. But hav- 
ing ridiculed the notion that infla- 
tion might rise they will have to 
work hard to convince markets that 
their attitude has really changed. 

In the meantime, the degree of 
market volatility will depend on the 
Fed’s willingness to put teeth into 
Mr Bentsen's dollar policy. After 
Friday’s very strong employment 
report, there is no longer any doubt 
that it needs to tighten monetary 
policy again. Since January the 
economy has generated lm new 
jobs, a marked acceleration in the 
pace of job creation from the second 
half of last year when economic 
growth averaged nearly 5 per cent 
at an annual rate. 

Other data last week signalled 
that the economy is rebounding 
strongly from a first quarter weak- 
ened by bad weather and other dis- 
tortions. The Purchasing Managers' 
Index - a guide to the health of 


manufacturing - rose more sharply 
than expected. And the Fed released 
a notably bullish Beige Book assess- 
ment of regional trends. Highlights 
included double-digit annual 
increases in retail sales in many 
areas, brisk housing markets and 
“near capacity” production of cars, 
vehicle parts, steel and building 
materials. Ominously, there were 
reports of significant upward pres- 
sure on raw materials prices. 

The economy may now well be 
growing at an annual rate of 4-5 per 
cent in real terms - for above its 
long-run potential. Some analysts 
expect annualised growth this quar- 
ter of 6 per cent. With the dollar 
weak and credit growing briskly, 
the case for a decisive tightening of 
monetary policy could hardly be 
stronger. Wall Street is looking for 
an increase in short-term rates of 
half a percentage point, preferably 
this week but no later than the 
Fed’s May 17 policy meeting. 

If the Fed delivers, it may buy 
temporary calm in foreign exchange 
markets. Ultimately, however, mar- 
kets want to be reassured that Mr 
Clinton understands the economic 
facts of life. The president needs to 
declare his personal commitment to 
low inflation, sound money and a 
strong dollar - and then encourage 
Mr Greenspan to play tough. 


Observer 


A last puff for 
Fidel? 

■ Has Fidel Castro really given 
up umpiring cigars? And if he has, 
what will main* him chang e his 
mind and light up one of his 
favourite Cohibas? 

These are not the sort of 
questions that the New York Times 
co* CBS would put to Cuba’s 
reclusive president But then they 
did not get tiie scoop, and New 
Yorker Marvin Shanken, owner 
of a two-year-old special interest 
magazine. Cigar Aficionado, did. 

Like most serious smokers, Fidel 
can remember the day he gave up 
- August 26 1965. But hadn't he 
ever lit up in the privacy of his 
home? No, said Castro, arguing 
that it would involve several 
accomplices - somebody to buy 
the cigars, another to hide the 
ashes. Clearly, Shanken found this 
hard to believe. Not even a puff? 

Castro: “No. No." 

Shank en: “Not even a little puff?" 
Castro: “Not one." 

So undo- what circumstances 
would fee president smoke his 
country's most famous product? 

Hie might be tempted to smoke a 
cigar of peace with US president 
Bill Clinton if the US market was 
re-opened to Cuban cigars. But he 
didn't hold out much hope. 


For a start Castro didn't want 
to lose his no-smoking modal 
awarded by the World Health 
Organisation. And even if the WHO 
gave the OK. there was still the 
problem of Hillary Clinton’s new 
nomnoking policy in the White 
House. Pom- old Hillary gets blamed 
for everything these days. 


Novel delights 

■ A visitor to the smart new 
Gresham Street he a dquar ters of 
College Hill Associates, a London 
PR firm, was much taken with the 
fancy wallpaper in one meeting 
room, ctmningiy disguised, trompe 
i'oeti fashion, as book spines. The 
“shelves” are adorned with classic 
authors like Owen, Dante, Shaw, 
Racine and Austin. Austin? 

Must be the little-known British 
linguistic philosopher J L Austin, 
rather t han the more famous Jane 
Austen. Adds a touch of class to 
the place, doesn’t it? 


Starck solution 

■ Moving offices from one side 
of town to the other? Philippe 
Starck, the s up e rs t a r French 
industrial designer, has solved what 
can be a traditional corporate 
headache with some style. Having 
transferred Ins headquarters to 



an the way 1 

Issy Les Moullneaux on the 
outskirts of Paris, he compensated 
his employees for any upheaval 
in their travel arrangements by 
giving each of them a shiny silver 
mobylette, or moped, so they can 
whizz through the traffic jams to 
get there. 


Suction power 

■ Those seeking straws In the wind 
concerning the fate of Britain's 
prime minister John Major will 


dutch at this latest one. Apparently 
he has fallen almost as low in the 
eyes of the image-makers as that 
other great public relations 
disaster. Hoover. In a survey of 
100 marketing directors around 
the UK, Le Fevre Williamson found 
that Hoover got 11 per cent of the 
votes for worst PR image, closely 
followed by Major at 7 per cent 


Lucky for some 

■ Call it foolhardy, call it courage; 
few politicians would schedule a 
keynote speech by an embattled 
political leader on a Friday that 
fell cm the 13th of the month. The 
Scottish Conservative and Unionist 
party has done just that for John 
Major’s closing rally at this week's 
Inverness party conference. Tan 
Lang, Scottish secretary, doesn’t 
inspire much confidence with his 
explanation that “we control a lot 
of things, but we don’t control the 
calendar". Isn’t that supposed to 
be one of the few things left that 
his party can control? 


Green surprise 

■ Europe’s “green" parties come 
in. all sorts of political shades, but 
none comes near to matching the 
performance of the Hungarian 
"greens”. Instead of ramp ai gnmg 


for population control, the 
Hungarian greens' TV broadcasts 
call on Hungarian men to do the 
“daily triple" with their wives. 

The party does not spell out in 
detail what it is Hungarian men 
should do three times a day. But 
party officials believe it would 
"increase the birth rate and lead 
to a decline in homosexuality, 
prostitution and the divorce rate". 

However, this brave rallying cry 
has yet to capture the imagination 
of the Hungarian electorate. Early 
returns suggest that the party has 
as much chance of capturing a seat 
as Britain’s Screaming Lord Sutch. 


Idle chaff 

■ Senator Kent Conrad of North 
Dakota has come up with a novel 
idea for concentrating Canadian 
minds on the protracted North 
American trade war over wheat 
and barley subsidies. “We've got 
300 Mmuteman Ills in North Dakota 
that we’re ready to re-target and 
maybe that will get their attention," 
he recently joshed In a US Senate 
committee hearing. 

Those who berate Cana dians for 
lack of humour must think again, 
however. Hot after Conrad's quip, 
Canada’s defence ministry now 
says it's scrapping the country's 
1,449 nuclear air raid sirens. 

Top that. Senator. 








16 



mm 

Wiring Syrtenn SpoctiHifr 

Ethernet • IBM Cobling System • LAN 

FINANCIAL TIMES 

1 A FINANCIAL TIME j 

( for change ( 

Fibre Optics ■ AT&T's P0S • Nevada Western 
Beldc.n * Digital'! DECcor.nect 

Tel. 0753 656394 

Monday May 9 1994 

1 J 


British banks in pilot scheme 
to dispense adverts with cash 


By Diane Summers, 

Marketing Correspondent 

Two leading UK banks are poised 
to rash in on their cash dispens- 
es by using them as a way of 
selling advertising space and 
issuing discount vouchers. 

Instead of a vacantly blinking 
"Welcome, please insert your 
card” sign, customers will be 
greeted with an advertisement, 
which could be for a local store 
or a nationally available product 
Coupons used to buy products at 
cut prices will be issued through 
the dispenser together with the 
cash. 

It is likely t hat banks will com- 
bat criticism about potential lit- 


ter by allowing customers to opt 
not to receive the vouchers. 

The two hanks, whose identity 
is being kept secret, are planning 
to test the scheme later this year 
at about 150 cash dispensers, 
according to Aimmedia Interna- 
tional, a company based at King- 
ston upon Thames, south of Lon- 
don, which has developed the 
system 

If the three-month trials are 
successful, the company hopes to 
market the system to other UK 
banks which together have more 
thaw 18,000 dispensers. The 
country's building societies, 
which lend money for homes and 
offer other financial services, 
could also be attracted to the 


scheme, the company believes. 

In the US, the National Bank of 
Commerce, Tennessee, is testing 
the idea, and Aimmedia plans to 
approach hanks in Spain, Portu- 
gal, Italy. France and Scandina- 
via. 

Advertisers will pay an average 
of £110 ($160) a week for the 
exclusive use of a machine, 
which will issue a maximum of 
2,000 vouchers during the week. 

It will he possible to target par- 
ticular rarsfi n^nhrflws to marirn- 
ise the effect of the advertising. 
For avampi g, a dispenser near a 
large music shop might issue 
vouchers for compact discs and 
audio cassette tapes. 

On the reverse side of the 


vouchers, banks will print their 
own, possibly linked, advertising. 
A voucher that could be 
redeemed against a holiday, far 
instance, could also be uskl to 
advertise travellers’ cheques. A 
car test-drive offer might also 
promote the bank’s car loans. 

Mr Steve Ross, Aimmedia’s 
managing director, said the 
advertising offered banks the 
chance to make money out of 
their costly dispensers. Manufac- 
turers and retailers would be able 
to target consumers In the high 
street. “A computerised geo- 
graphical information system 
wQl allow the advertiser to spec- 
ify the Tnaphrnns fchair vouchers 
are dispensed from,” he sa id. 


Mitterrand can’t wait to 
unwrap historic project 


It was a weekend of false starts 
on historic projects for President 
Francois Mitterrand. On Friday 
he helped Queen Elizabeth open 
the Channel tunnel, which then 
promptly dosed. A day later, be 
went to Brest to “launch* 1 
France’s, and Europe’s, first 
nuclear-powered aircraft carrier, 
but the Charles de Gaulle stayed 
firmly in drydock. 

If five months seems a long 
wait to use the Channel, spare a 
thought for the impatient French 
navy which will have to wait 
another five years, until s umm er 
1999, before the Charles de 
Gaulle is folly fitted ont with all 
its weaponry and Rafale jets. 

What the navy bad to be con- 
tent with cm Saturday was the 
wrapping up of the carrier’s hull 
and conning tower in a huge tri- 
colour, and then a ceremonial 
“undressing” in the presence of 
Mr Mitterrand, and three of the 
people who would like to succeed 
him - Prime minister Edouard 
Ballad or, Paris Mayor Jacques . 
Chirac and Defence minister 
Francois Ldotard. 

The carrier's real launch wQI 
take place out of the limelig ht in 
a week or so when tide and 
weather are judged right, 
because the navy wants to take 
no risks with the ship which has 
cost FFrl7.5bn so for, not count- 
ing an even more expensive hill 


David Buchan in Brest sees the 
‘launch’ of the Charles de Gaulle 


for the Rafales. Ironically, tim- 
ing of the launch of tills ship, 
symbol of France’s we-depend- 
on-no-one sovereignty, is very 
much dictated by a Dutch sal- 
vage company, which can only 
spare for a brief time its giant 
barge crane to lift the nuclear 
reactors into the ship. 

Bnt the 38,000-toune carrier 
will be worth the wait “Euro- 
pean navies have some 200 frig- 
ates between them, bnt only ours 
has true aircraft carriers,” said 
Mr Mitterrand. Though less than 
half the size of their US counter- 
parts, French carriers are the 
only European ones capable of 
putting heavy planes into the air 
since Britain opted for the Invin- 
cible dess of mini-carrier with 
its acrobatic Harriers. 

But France’s Foch and Clemen- 
ceau carriers (32,000 tonnes) 
have each seen more than 80 
years’ service, and cannot take 
tile heavier, 15-20 tonne version 
of the Rafale fighter/bomber 
coming into service in 1999. 
Equally significant are France’s 
unrelenting ambitions for its 
own defence and that of Europe 
- shared as much by the socialist 
president as by the conservative 


Balladm- government - and the 
new importance it places on cri- 
sis prevention and power projec- 
tion, which are classic rationales 
for aircraft carries. 

“There is no reason why 350m 
Europeans cannot develop 
together their own means of 
security,” said Mr Mitterrand. 
But co-operation involves conces- 
sions, he told an audience of sev- 
eral thousand, which included 
Admiral Sir Kenneth Eaton, 
Comptroller of the Royal Navy. 
Bettering to the Horizon project 
In which France, Britain and 
Italy hope to build a dozen or so 
frigates together, the president 
said France’s Horizon-class frig- 
ates would be the essential 
escort to the Charles de Gaulle. 

But he warned of “industrial 
difficulties” which were prevent- 
ing the project getting off the 
ground. French officials said 
defence ministers were delaying 
si gning a formal memorandum 
of understanding, until an 
Anglo-Italian dispute over the 
radar had been resolved. Italy Is 
offering the completed Eatpar 
system, while the UK claims its 
own Mesar system would be 
bettor still. 


GE bid wins 
Kemper 

Continued from Page 1 

hope of making a quick profit 
from takeovers. 

Mr Mathis’ letter had added to 
a belief that Kemper’s board 
would be prepared to accept an 
immediate offer of $65 a share. 
However, the GE Capital hid 
failed to flush out any rival 
offers, as some Kemper execu- 
tives had hoped, and even at $60 
a share the deal is well above the 
$40 level at which Kemper was 
trading until mid-March. 

GE Capital said its new offer 
was dependent on a review of 
Kemper’s troubled $1.7bn real 
estate portfolio, and outstanding 
litigation against the company. 

The Kemper annual meeting, 
due on Wednesday, has been 
postponed until August 22. 


African bank 


Continued from Page 1 


ground for buck passing by bank 
staff,” says the report The task 
force urges African member 
countries to take a more active 
interest in monitoring the bank’s 

financial health 

Mr Ndlaye, in the last year of a 
second five-year term, has 
already prepared an action plan 
to respond to the report’s recom- 
mendations. 


Pressure grows in UK for EU referendum 


By James Blitz 

Mr John Major faces growing 
pressure to promise a referendum 
on the next step of European 
integration in an attempt to unite 
the UK Conservative party and 
bolster his faltering leadership. 

Leading figures on both sides' 
of the party believe a pledge to 
hold a referendum on issues such 
as the creation of a single Euro- 
pean currency may be the only 
way to bridge divisions. 

Mr Major is understood to 
believe that promising a referen- 


dum now on unspecified changes 
in the European Union which 
may he proposed after 1996 is 
fraught with practical difficul- 
ties. But he has not ruled it out if 
the crisis deepens. • 

There were dear signs of divi- 
sion within the cabinet over such 
a referendum. Two cabinet minis- 
ters with anti-European creden- 
tials did not rule out the pros- 
pect, but Mr Kenneth Clarke, the 
chancellor, came out heavily 
against it 

Mr Michael Howard, the home 
secretary, said that in the run-up 


to the European elections he did 
not want to talk about the 
changes to European insti tutions 
that will be considered in 1996. 

Mr John Redwood, the Welsh 
secretary, also said the govern- 
ment should decide whether to 
hold a referendum after propos- 
als for a single currency are fina- 
lised. 

However, Mr Clarke, a co mmi t, 
ted pro-European, said that the 
idea could only confuse voters. 
He told BBC Radio's The World 
This Weekend: “The difficulty, as 
other countries found daring the 


Maastricht debate, is that when 
you have a referendum, people do 
not answer the question in hunt 
of them." 

Mr Clarke's views contrast ed 
with those of some pro-European 
backbenchers who believe that a 
promise is the only way to heal 
the damaging division. 

Some MPs believe that Mr 
Michael Heseltlne, the trade and 
industry secretary, could promise 
a referendum as a way of uniting 
MPs around his candidacy if 
there were a Tory leadership con- 
test this autumn. 


FT WEATHER GUIDE 


Europe today 

High pressure over England will extend 
towards Scantflnavta, but a band ot frontal 
cloud and showers will settle from southern 
Norway across the Alps into Sardinia. The 
French Alps and south-eastern France 
might have thunder showers and there 
could abq be thundery outbreaks In 
southernmost Italy. Regions near the centre 
of high pressure win have a lot of sunshine. 
Sweden and Finland will be unseasonably 
warm with temperatures around 20G. 
England will be sunny but Ireland wm be 
overcast for most of the day. Western 
Ireland will have a rainy afternoon. 

Five-day forecast 

High pressure In the north wifl strengthen, 
bringing dry and warm easterly winds from 
Russia to England. From Thursday It win 
become doudler and there win be thundery 
showers in France, the southern British Isles 
and the Low Countries. Southern Europe 
will be doudy with sunny spells and there 
win be occasional showers In Spain. 
Southern Norway. Sweden and Finland wfll 
continue to be warm wife almost cloudless 
skies. 


TODAY’S TEMPSUITURES 



Situation at 12 GMT. Tampen d uns madmum 


Faro 



Maximum 

(Ming 

ram 

27 

Ceraas 

shower 

29 


Celsius 

Belfast 

doudy 

13 

Cardiff 

Mr 

15 

Abu Dhabi 

sun 

40 

Belgrade 

fair 

20 

Casablanca 

ear 

20 

Accra 

shower 

32 

DOTn 

Sun 

28 

CNcago 

fair 

18 

Algiers 

fair 

22 

Bermuda 

fair 

26 

Cologne 

shower 

18 

Amsterdam 

fair 

15 

Bogota 

rain 

18 

D* Salaam 

fair 

29 

Athens 

lair 

21 

Bombay 

fair 

33 

Dakar 

91*1 

27 

Atlanta 

thund 

25 

Brussels 

fair 

19 

Dolan 

thund 

29 

a Aces 

fair 

18 

Budapest 

Mr 

22 

Delhi 

tor 

39 

B.ham 

fair 

15 

Cjwgan 

fa*- 

IS 

Dubai 

tor 

38 

Bangkok 

thund 

34 

Cairo 

am 

30 

Dublin 

doudy 

14 

Barcelona 

am 

21 

Capo Town 

Mr 

20 

Dubrovnik 

fair 

21 



Quality flights made in Germany, 

Lufthansa 

German Airlines 


Istanbul 

Jersey 

KaracN 

Kuwait 

LAngataB 

Las Patous 

Una 

Lisbon 

London 

Unubourg 


15 Madrid 

23 Majorca 
17 Malta 

15 Manchester 
28 Mmfa 
15 Melbourne 

19 MtudcoCfty 

21 Miami 
30 Mai 
30 Montreal 
17 Moscow 
13 Munich 
35 Nairobi 
33 Napfes 

20 Nassau 

22 New York 

24 Nice 

21 Mcosta 
15 Oa to 
13 Paris 
15 Perth 
21 Prague 


fair 

sun 

Mr 

SU1 

tfnsid 

shower 

doudy 

sun 

fair 

ram 

fair 

(far 

shower 

Ihund 

shower 

sui 

shower 

fair 

fair 

fair 

fair 

sun 


26 Rangoon 
» Reykjavik 

21 Rko 

18 Rome 
34 & Frisco 
15 Seod 

28 Singapore 
31 Stocidnbn 

19 Strasbourg 
18 Sydney 
18 Tangier 
18 TfaAvfv 
25 Tokyo 

20 Toronto 

29 Vancouver 
24 Venice 
20 Vienna 

22 Warsaw 
17 Washington 
17 WeSngton 

22 Wtonpeg 

23 Zurich 


xdy 31 
fair 20 


fair 18 
fa ir 25 
fair 22 
rain 12 
sun 19 


fair 22 
fat 24 



THE LEX COLUMN 


Shoring up the dollar 


Last week’s intervention to support 
the dollar seans to have worked for 
the time being, but it has done noth- 
ing to reverse the fundamental prob- 
lem. japan has a current account sur- 
plus a capital inflow, while the 
opposite pertains in the US. As long as 
that continues the dollar remains vul- 
nerable. The immediate assumption 
was that the Federal Reserve would 
accelerate its rate tightening in order 
better to underpin the dollar. This 
may yet happen after Friday’s strong 
employment data, but it Is the Trea- 
sury which decides on intervention 
and is worried about the dollar. The 
Treasury has no control over interest 
rates. Any Fed decision on that scare 
is more likely to be determined by 
domestic conditions than its percep- 
tion of the dollar. 

One of the Treasury’s concerns, 
which is all the more understandable 
in the light of this week's borrowing 
operation, is that a weak dollar saps 
overseas demand for US bonds. Higher 
interest rates, of course, would make 
this problem worse in the short run. If 
the Treasury ready does believe the 
dollar is under-valued, perhaps it 
should consider another course. It 
could cover part of the US budget defi- 
cit by borrowing yen. 

That would both offset some of the 
capital Sows which have been depress- 
fog the dollar and reduce the weight of 
supply on the US bond market More- 
over. with Japanese government bond 
yields more than three points lower 
than their US equivalent it could 
prove a cheap source of funds. The 
precedent is the foreign currency 
Carter bonds, issued when the dollar 
was under pressure during the 1970s. 
The dollar’s subsequent recovery 
made the bonds an exceptionally good 
deal for the US taxpayer. 

IBM 

IBM’s revamp of its 40.000 salesforce 
has a laudable enough objective: to 
present “one face” to each customer. 
Too often the computer giant has con- 
fused its customers by sending in a 
different representative for each prod- 
uct One DBM-er could be peddling 
mainframes, another data communica- 
tions gear and a third personal com- 
puters - all to the same customer and 
sometimes in competition with each 
other. The structure also meant few 
sales people had a deep knowledge of 
their customers’ businesses. 

Under the reorganisation, 14 new 
divisions responsible for sidling a full 
range of lot to specific industry sec- 


VtMtafone 

Share price relative to the 
FT-SE-AAI-Share Index 
140 - 


130 


120 - 


110 



100 

May 1983 
Source: FTCtopMe 


1994 May 


tore such as travel, oil and health will 
be created. Though hardly an original 
idea - Hewlett Packard and Digital 
Equipment already operate in this 
way - the aim of getting closer to 
customers has its merits. 

The snag is that IBM chief executive 
Mr Lou Gerstner has not felt able to 
go the whole hog. The new industry 
structure will co-exist with the old 
geographical and product structures. 
IBM's regional chiefdrans will remain, 
while part of the salesforce will still be 
organised on product lines. The result 
could be a tangled management 
matrix. One only has to look at the 
snarl-up caused by a similar matrix at 
Digital to see the risks IBM feces. Mr 
Gerstner presumably concluded that a 
bolder shake-up would have ruffled 
too many feathers. While that may 
have been the right judgment, it 
serves to underiine how hard it is to 
tom the IBM juggernaut around. 

Pharmacia 

Sweden’s decision to press ahead 
with tiie privatisation of Pharmacia 
must come as a relief to the company's 
management The drugs group has 
been a pawn in a game of industrial 
chess ever since Volvo bought its 
stake nine years ago. The subsequent 
acquisition spree in Sweden and 
merger with Procordia can only have 
been a distraction from the serious 
business of running an international 
pharmaceuticals group. A trading 
margin of 14 per cent - against an 
industry average in the high 20’s - 
hints at how much work remains to be 
done. 

Rationalisation should allow Phar- 
macia to deliver higher earnings over 
the next year or two even if sales 
growth proves elusive. There is noth- 
ing in the company's diverse portfolio 


of drugs likely to push it into the same 
growth league as Astra. Sweden's 
glamour pharmaceuticals stock. But 
neither does Pharmacia rely cm a tin- 
gle blockbuster drug or fece any data, 
aging patent expiries. If management 
can deliver cost-savings. Pharmacia 
could be a tow-risk bet during a diffi- 
cult period for the sector. 

With the shares yielding around 
per cent, compared with nearly 6 per 
cent for Glaxo, international Investors 
win have to be convinced of this logic 
if privatisation is to be a runaway 
success. The eventual sale of Video's 
23 per cent stake - although at least 
18 months away - and the govern- 
ment’s remaining 10 per cent Interest 
could nudge it difficult for the shares 
to perform even after next month’s 
offering has been digested. 

Mobile communications 

Vodafone has managed to milk its 
franchise with great skill since the 
mid-1980s. But the value of this fran- 
chise is dwindling at a pace much 
foster than the company’s current 
£5.5bn capitalisation implies. The 
strong rally in Vodafone shares since 
the middle of last month has been 
driven by enthusiasm over its success 
in winning more than half the mobile 
phone market and relief that the new 
Orange service was not more aggres- 
sively priced at launch. 

But these are short-term factors. 
The medium-term outlook is not so 
rosy. Orange will become a more for- 
midable rival from the middle of next 
year when its network is fully devel- 
oped. Mercury One-2-One, the other 
new player, is further behind but 
could accelerate Its investment plans. 
These two operators will flood the 
market with capacity. Their twaiy'mil 
costs will also be below Vodafone’s 
and Cellnet's. Sharp price cuts and 
margin squeezes will be unavoidable. 
Strong growth in demand will counter- 
balance these effects but not suffi- 
ciently to enable large profit increases 
beyond the next few years. 

Vodafone wfll still be able to earn a 
decent return on its investment for 
many years to come. But that is little 
comfort. The company’s net asset 
value is only £600m an a historic cost 
basis and. given reductions in telecom- 
munications equipment prices, proba- 
bly not much more on a replacement 
cost basis. Vodafone is now valued at 
over nine times asset value. When the 
market stops looking at the attractive 
short-term prospects, the shares could 
come down with a bump. 


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FINANCIAL TIMES 

COMPANIES & MARKETS 

(glTHE FINANCIAL TIMES LIMITED 1994 


EUROPE’S LEADING DEBT 
COLLECTION COMPANY 


ft* 

inti iui r| justitia 


NXASSO 


THE EUROPEAN ENTHT 1IS3-B4 
WHITBREAD BO BHD THE WORLD RACE 


Monday May 9 1994 


Mannesman!! swings to heavy loss 


By David Walter 
In Frankfurt 

Mannesman!!, the German 
engineering group whose products 
range from pipes to mobile tele- 
phones, made a net loss of DMSISm 
($30Qm) last year, a sharp swing from 
a net profit of DM68m in the previous 
year. 

The group, which in February 
warned that it would make a heavy 
loss for 1993, blamed the reverse on 
one-off restructuring costs coupled 


with the impact of further losses in its 
mobile-phone operations. 

In a statement, M ft nTiBKmann said it 
would be cutting its 1993 dividend to 
DM5 per share - down from DM6 in 
the previous year. 

At. the same time, the group con- 
firmed that Mr Werner Dieter, archi- 
tect of the group's expansion away 
from traditional pipe manufacturing 
activities into car component produc- 
tion and mobile phones, would be 
Stepping down as chairman of the 
gFOUp'S managnmant board following 


this July's shareholders mee tin g . Mr 
Dieter's successor is to be Mr Joachim 
Funk, 59, currently financ e director 
anfl deputy c h airmen of t he Manner - 
mann management board. 

The results for the group included a 
one-off charge of DMSISm to cover 
restructuring costs. The rationalisa- 
tion measures undertaken last year 
would l ead to a lasting improvement 
in earnings, Marmssmann said. 

Another factor behind the group's 
poor performance was a DM224m loss 
on its D-2 mobile-phone operations. 


down from a loss of DM340m in the 
previous year. The group revealed in 
February that turnover at the Mobil- 
funk subsidiary rose from DMl38m in 
1992 to DM902m last year. 

As disclosed in February, Mannes- 
mann’s group turnover dropped 
slightly from DM28.02bn to 
DM27-96bn, while order intake rose 
from DM27.76 to DM27.99bn. The 
group blamed Its poor operating per- 
formance on the state of the world 
economy and in particular on weak 
demand for capital goods, coupled 


with the impact of adverse currency 
movements. 

At an operating level, machine tools 
was the only one of the group's six 
business divisions to have made a 
profit last year - but even there prof- 
its were down substantially on the 
1992 result 

The parent company reported a net 
profit of DM197m, down from DM244m 
a year earlier. This profit enables 
shareholders to receive a dividend in 
spite of the scale of the group-wide 
losses, Mannesxnann said. 


Anglo and De Beers are emerging from isolation, writes Kenneth Gooding 

African empire open to the world 



Julian Ogfivie Thompson: South Africa's economy could grow as fast as Brazil’s did 20 years ago 


Halifax 
aims for 
expansion 

By John Gapper, 
an London 

Halifax, the largest building 
society in the UK, hopes to 
take a "significantly bigger 
share" of mortgage igniting as 
part of an ambitious expansion 
put forward by Mr Mike Black- 
burn, its chief executive. 

The new strategy, which 
includes diversifying into new 
forms of lending and expand- 
ing wxigfing operations si ich as 
estate agency, is a further sign 
of growing competition In 
retail financial services. Fol- 
lowing Lloyds’ £lBbn bid to 
take over Cheltenham & 
Gloucester Building Society 
last month, several banks have 
said they would like to buy 
societies. 

In a document sent to its 
24,000 staff, Mr Blackburn says 
a large proportion of its litm 
mortgage borrowers currently 
buy nn tb m g else from Halifax, 
"which is not the case with our 
closest competitors". 

Although the document says 
Halifax has "an excessive 
dependence on mortgage 
income”, it also argues that it 
should expand its 19 per cent 
share of the mortgage market 
by organic growth, and by buy- 
ing mortgage bodes from oth- 
ers. 

Mr Blackburn, who was 
recruited from Leeds Perma- 
nent last year, has set a new 
“mission" for it to be “the big- 
gest and best personal finance 
business in the UK”. It already 
has the largest share of mort- 
gages, and personal savings. 

He said that Halifax , which 
has assets of £67bn and is 
about twice the size of Nation- 
wide, the second-largest soci- 
ety, had not expanded other 
services nmniig h. 


J ulian Ogilvie Thompson, 
flhairmari of Anglo Ameri- 
can Corporation, the 
world's largest natural 
resources group, had two rea- 
sons for celebration at the 
weekend. 

There was the successful 
outcome of the first all-race 
elections in South Africa, 
where Anglo dominates the 
economy. 

There was also a 60th anni- 
versary party in London for 
the Central Selling Organisa- 
tion, the most successful cartel 
In history, accounting as it 
does for 80 per cent of world 
trade In rough (uncut) dia- 
monds. The CSO belongs to De 
Beers, another important ele- 
ment in Mr Harry Oppen- 
heimer’s industrial empire and 
another company which has 
Mr OgOvie Thompson as chair- 
man. 

Anglo and De Beers are 
amgrg fai g from diffic ult years 
of a partheid, isolation and fre- 
quent tension with their gov- 
ernment Mr Ogilvie Thompson 
has to ensure that the empire 
continues to flourish as South 
Africa rejoins the rest of the 
world, a South Africa that he 
believes, has the capacity to 
grow economically as fast as 
Brazil did in the late 1960s and 
1970S. 

Apartheid, he says, was eco- 
nomically disastrous for South 
Africa, In that it “stopped the 
clock”. But the delay in bring- 
ing in electoral reform had one 
big advantage: “The system of 
socialism and central planning 
as practised in Russia and east- 
ern Europe has been shown 
not to work." 

Among other things, this 
means that Anglo is no longer 
such a natural target for an 
AN C-c on trolled government 
either to break-up into its min- 
ing, industrial and investment 


parts, or to nationalise. The 
ANC, he says, has been "on a 
great trek to economic sanity”. 

He says the degree of Anglo’s 
domination of the country’s 
economy has been exagger- 
ated. However, by its own 1993 
calculations, Anglo represents 
about 25 per cent of the Johan- 
nesburg stock exchange and 6 
to 7 per cent of South Africa’s 
capital assets. 

Mr Ogilvie Thompson insists 
that g-m aii countries such as 
South Africa cannot afford US- 
style anti-trust legislation if 
they are to have companies 
that can compete internation- 
ally. Sweden and the Nether- 
lands show what can be done. 


Anglo is urging the new gov- 
ernment to have an indepen- 
dent inquiry into competition 
policy. “I can't believe that the 
country will be so silly as to 
penalise success." 

And if Anglo were to be split 
up, the likely buyers would be 
existing pension funds and 
other Institutional investors. It 
would do little for black 
empowerment, he says. Instead 
Anglo is promoting black own- 
ership of business, for example, 
by prompting the “unbundl- 
ing" of Johannesburg Consoli- 
dated Investments (JCI), a min- 
ing and industrial concern in 
which Anglo and De Beers 
hold nearly 50 per cent, in a 


way that should transfer con- 
trol of some assets to black 
investors. The Sowetan news- 
paper is also being transferred 
to black ownership. And last 
year Anglo spent about RIOGm 
buying products and services 
from small mainly black- 
owned, businesses that it bad 
encouraged with training and , 
sometimes, financial help. 
“You need big businesses for 
exports but small businesses 
create most of the jobs,” says 
Mr Ogilvie Thompson. 

However, Anglo remains 
very much an anachronism 
when viewed by international 
investors. It is a huge, central- 
ised group with complex cross 


shareholdings that, according 
to its critics, renders manage- 
ment unaccountab le to share- 
holders. The complicated con- 
trol structure ensures that 
Anglo remains a family busi- 
ness. even though Mr Harry 
Oppenheimer, 84-year-old son 
of tiie founder, retired as chair- 
man 12 years ago. 

Mr Ogilvie Thompson 
admits: "We have a major job 
to get our structure under- 
stood. We must improve our 
presentation of ourselves.” But 
he insists AngLo is not a con- 
glomerate in the 1980s Ameri- 
can style, it has not developed 
by acquiring companies for 
shares bnt by starting most 
from scratch and “following 
our noses". Its metallurgical 
skills lead it to set up the High- 
veld steel company, for exam- 
ple. He recalls that the South 
African mining industry devel- 
oped the way it did because of 
shortages of capital and skills. 
"When you had a good metal- 
lurgist, you shared him among 
several companies." 

Anglo has been “tidying up" 
its structure to make it more 
logical. Most of the industrial 
assets have been moved into 
Auric (Anglo Amer i can Indus- 
trial Corporation). A reshuffle 
of assets between Anglo and 
Minorco, its Luxembourg-regis- 
tered offshore investment arm, 
has ensured there will be no 
conflict of interest - Anglo 
searches for mineral opportuni- 
ties in Africa, Minorco gets the 
rest of the world. 

There is still some tidying up 
to do and more non-core assets 
will be sold, such as the Argus 
newspaper operations being 
acquired by Mr Tony O’Reilly's 
Independent Newspaper group. 

But 10 years from now. the 
Anglo-De Beets group will not 
look much different, Mr Ogil- 
Contmued on Page 19 


Marc Rich 
ferrous 
team goes 
it alone 

By David Blackwell 
In London 

A team of ferrous metals 
traders this morning resigned 
from Marc Rich, the Zug-based 
international commodities 
trading group. 

The team of 18 has set up its 
own trading company, to be 
known as Profer, which will 
start operations this week 
from seven offices around the 
world. It will also have agents 
in a further 11 locations. 

Mr Omar Shah, who will be 
managing director, said the 
new company had conserva- 
tively estimated that it would 
turn over lm tonnes of ferrous 
raw material, or about Sl50m 
in its first year. Hie company 
is aiming at least to double its 
trading in the second year. 

Tnrnover at Marc Rich in 
1992 was (24bn, making it the 
29th biggest company in the 
FT's European Top 200. Mr 
Willi Strothotte, who returned 
to Marc Rich as chief execu- 
tive last year, said the defec- 
tions would have an insignifi- 
cant effect on the group's 
business. 

“It’s something that happens 
in a large organisation when 
people seek greener pastures,” 
he said, adding that senior 
traders had remained at Marc 
Rich, which would continue in 
the ferrous markets. 

He dismissed as an “insult" 
any comparison with the well- 
publicised departure in 1992 erf 
Mr Claud Dauphin, head of the 
oil trading operations, and Mr 
Manny Weiss, bead of sugar 
trading. 

Their resignations, along 
with Mr Strothotte himself, 
prompted speculation of a 
power straggle at the top of 
the organisation. Last Decem- 
ber Mr Marc Rich resigned as 
chairman of the company and 
restructured it to give 72J5 per 
cent of its capital to manage- 
ment and key employees. 

Mr Shah said dissatisfaction 
with “the much heralded 
equity restructuring" was a 
key reason behind the decision 
to set up Profer, which would 
be “sufficiently well capital- 
ised". It had not ruled out 
diversifying into non-ferrous 
metals. 

Mr Bruno Furrer wifi be the 
chief executive. 

He has spent 18 years with 
March Rich and will remain in 
Zug where Profer is to have Its 
head office. 


Markets 
this week 

Starting on page 20 


MARTIN DICKSON: 

GLOBAL INVESTOR 

t lf the Fed foils 
to tighten 
short-term 
interest rates, 
it may face a 
week of 
tumbling 
/ stock and 
bond prices 
and further weakening of 
the dollar. There is a 
powerful case for immediate 
action - perhaps as early as 
this morning. Page 20 

MARTIN WOLF: 

ECONOMIC EYE 

Martin Wolf 
argues that 
China’s 
market- 
oriented 
economic 
development 
needs to be 
encouraged by 
the US, which should start 
with renewal of MFN 
treatment Page 20 

Bonds: 

Turkish officials continue 
their talks with the 
International Monetary 
Fund on a possible stand-by 
facility. Page 22 

Equities: 

After Friday's news of a 
surprising jump in US 
employment levels for April, 
many investors are 
convinced that Wall Street 
has a long way to go before 
hitting bottom. Page 23 

Emerging markets: 

Foreign investors are 
reacting with remarkable 
equanimity to the prospect 
of the left regaining power in 
Hungary. Page 21 

Currencies: 

The dollar looks set to 
remain the focus, with the 
market anticipating shifts in 
interest rates to support last 
week's intervention effort 
Page 21 


STATISTICS 


Base lending rates 33 

Company meetings 7 

Dividend payments 7 

FT-A World indices 33 

FT Guide to currencies 21 

Foreign exchanges 33 

London recent issues 33 

London share service 34,35 
Managed fund service .. 29-32 
Money markets .................. 33 

New Int bond issues 22 

World stock mkt indices 24 



This week: Company news 


JAPANESE SEASON 

Groups line up 
to report fourth 
year of decline 

The Japanese corporate results season 
starts this week with L390 companies, 
listed on the first and second sections 
of the Tokyo stock exchange, 
annniTnrrng annu al figures for the 
year to March. 

The trend is expected to be for 
companies to report profit declines 
for the fourth consecutive year, the 
longest period an record. The spate 
of announcements will last for about 
three weeks and comes against the 
background of continued recession 
and falling demand. 

Nomura Research Institute, the 

research arm of Nomura Securities, 
projects combined pre-tax profits for 
the last business year to fall 23-2 per 
cent Sales of tiie manufacturing sector 
are forecast to fall 4.9 per cent 

Although warning s prospects in the 
electronics and electronic parts sectors 
Improved, the lower earnings of basic 
materials companies, such as steel, 
cement, and paper and pulp makers, 
will have pulled profits lower. 

Capital investment excluding 
finimftia] companies, is expected to 
have declined by 1L4 per cent The 
only sectors likely to have increased 
investment are paper and pulp, drugs, 
foods, oil and coal, communications 
and utilities. 

Improvement in profit margins, lower 
labour costs, and a decline in 
depreciation and other effects of 
rationalisation are expected to help 
earnings for the year to March 1995. 

NRI expects pre-tax profits to rise 0^ 
per cent while capital investment is 
forecast to foil a further JL9 per cent 
in spite of an Increase in five sectors 
— building materials, electronics and 
electronic parts, oil and coal, 

transportation and utilities. 

However, the institute, which based 
Its forecast on an average yen rate 
of Y109.6 against the dollar, warns 
the profit outlook for this year will 
deteriorate if the annual average for 
the currency rises sharply. 


J.SafiMd nayf ■ - 



J SAINSBURY 

Charges take toll as 
growth years end 

j Sainsbury’s downbeat trading 
statement In January, when It 
announced a foil in underlying sales 
and gross margins, and a property 
writedown of £365m, was one of the 
lowest points in a bleak year for UK 
food retailers. 

The impact of those factors will be 
apparent on Wednesday, when 
Sainsbury is expected to announce 
a foil in reported pre-tax profits for 
the year to March from £735m to 
£320m-£355m. That is after both the 
£365m nan-recurring write-down on 
its properties, and a £4Qm recurring 
depreciation charge. 

Even adding back the charges, profits 
are at best expected to be only slightly 
better than test year - ending a decade 
of spectacular profits growth by the 
UK’s largest grocery retailer. 

Sainsbury is exported to address 
analysts’ questions on whether trading 
has improved and on the future of its 
“Essential for Essentials" campaign 
launched last October. That marked 
a move towards “everyday tow prices" 
on 300 own-label lines, accounting for 
about 10 per cent of turnover. 

Hailed initially as a clever strategic 
move, it has since been blamed for 
poorperfonnance- 

Analysts are also keei to hear more 

about Sainsbmy’S plans for its the 
Savacentre hypermarkets, Homebase 
D1Y superstores and US supermarket 
chain Shaws. 


OTHER COMPANIES 

Fiat on course for 
its biggest loss 

Plat, thft Italian automotive and 
industrial group, wifi announce the 
biggest toss in its history cm Thursday. 
It is likely to report a net loss for 1993 
of between LUOObn (SIJLbn) and 
L2400bn, and there is little prospect 
of a return to net prefit before 1995. 

The market has already taken 
account of the bad news - heralded 
in September when the group 
announced a L966bn plunge into the 
red for the first half - and is 
speculating on an end to the crisis. 
Spurred on by faint signs of recovery 
in the automotive market, and by early 
success of the Punto, Fiat shares have 
been among the best performers on 
a buoyant Milan stock market 

■ Roche: Directors of the Swiss 
pharmaceuticals group may shed more 
light on the rather high $5-3bn price 
they bid last week for US drugs group 
Syntax at the annual press conference 
tomorrow, Roche has revealed a 29 
per cent rise in 1993 net income to 
SFr2.48bn ($L7bn) but has yet to 
indicate whether it wifi continue 
defying the industry-wide profit 
squeeze. 

■ UK Insurers: Three of the biggest 
insurance companies are due to report 
a rise in profits for the first three 
months Q f 1994 , confirming the recovery 
in the general insurance market 
General Accident is expected to post 
pre-tax profits of about £60m ($90m), 
compared with £42m. For Commercial 
Union, which reports on Wednesday, 
forecasts vary from £38m to £80m, while 
the range for Royal Insurance is 
£15m-£50m. The companies have gained 


Roche 8 

Share price <SFr ‘OOO) 




from increases in insurance rates and 
an improved claims experience. 

■ Grand Metropolitan: Interim figures 
from the UK food and drinks group, 
due on Thursday, should show a 
healthy pre-tax profit increase of 
around 10 per cent to about £445m_ 
Floods in the US mid-west last autumn 
should have helped the PfUsbury Green 
Giant business, given the resulting 
rise in vegetable prices. The Burger 
King hamburger business, part of 
Pifisbury, should also produce a strong 
showing. The hot topic is whether 
GrandMet will take the opportunity 
of unwinding its unhappy 
Inntrepreneur pubs joint venture with 
Courage. 


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■ Unilever: First-quarter figures on 
Friday from the Angle-Dutch consumer 
products group should show only 
modest improvement, perhaps to £45Qm 
pre-tax against £440m, with detergents 
the most depressing factor. The recent 
downturn in the US started after the 
period and thin quarter should aisn 
start to show the costs of launching 
the new super-concentrated detergent 
across Europe. 


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Companies In tills Issue 


Anglo American 

17 

Australis Marfa 

19 

Automotive Products 

18 

&ia 

19 

British Land 

18 

Brown ajadwon 

18 

CFB (Scotland) 

18 

CRH 

18 

Commercial Union 

17 

De Beers 

17 

Eurocoptar 

19 


Fiat 

17 

General Accident 

17 

GoletsboroujJh Health 

18 

Grand Met 

17 

Hafitax 

17 

Keys Food 

18 

Laamo 

18 

Legal & Genera! 

IB 

Lombard Insurance 

18 

Mannesmem 

17 

Mare Rich 

17 


Northern Rode 

18 

P&P 

18 

Roche 

17 

Roya) Insurance 

17 

Sainsbury 

17 

Stanhope 

18 

TCI 

19 

Tenneco 

19 

Try 

18 

Unravei- 

17 

Yorkshire Water 

18 


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Authorised 
Business Centre 


Morse Computers. 081-8760404. 








FINANCIAL TIMES MONDAY MAY 9 1994 


COMPANIES AND FINANCE 


L&G to reappraise tie 
with Northern Rock 


By Alison Smith 

Legal & General, one of the 
UK’s largest life and general 
insurance companies, is to 
seek to devise a new relation- 
ship with Northern Rock budd- 
ing society. 

The need to reappraise 
Northern Rock's “tie" with 
L&G comes from the society's 
announcement last week that 

it planned to merge with North 
Of England, to form the UK's 
10th largest society. North of 
England is tied to General 
Accident, and the merged soci- 
ety could not maintain ties 
with both insurers. 

Mr Chris Sharp, Northern 
Rock managing director, is 
concerned about whether the 
society would find it worth- 
while continuing a tie against 
a background of rising compli- 
ance costs. 

Severing the link would rep- 
resent a further unwinding of 


relationships between building 
societies and life insurers, and 
could also point to a more gen- 
eral reconsideration by insur- 
ers of the benefits of having 
tied agents. 

Last week, for example, 
Nationwide, the UK's second 
largest society, announced 
plans to end its tie with Guard* 
inn Royal Exchange and set up 
wholly-owned life assurance 
and unit trust subsidiaries. 

The Northern Rock board 
will decide about the future 
arrangement with an Insurer, 
iT any. over the summer - 
ahead of the effective date of 
October for the merger. 

If it ended the relationship 
altogether. Northern Rock 
could stand to lose about Elm a 
year in premium income. 

One possibility is that North- 
ern Rock might become, in 
return I hr smaller commissions 
than it receives for being a tied 
agent, an “introducer" of busi- 


ness to L&G. On that basis, the 
society’s staff would not gtve 
financial advice, but simply 
pass on “warm leads” to an 
L&G sales force. 

L&G said that losing the tie 
with Northern Rods would be a 
“disappointment rather than a 
setback": some 40 per cent of 
new business in 1993 came 
from its direct sales force, with 
up to 30 per cent coming from 
independent financial advisers. 

However, Northern Rods was 
its largest tie with a society, 
since it lost the link with Chel- 
tenham & Gloucester, the sixth 
largest society. 

Other recent events may 
have contributed to making 
insurers wonder if having tied 
agents can be more trouble 
than it is worth: failures to 
meet regulatory standards 
relating to tied agents were ele- 
ments in the record £300,000 
fines imposed on Norwich 
Union end p remium Life. 


Goldsborough buys hospital 


Goldsborough Healthcare has enlarged Its 
position in the acute hospitals sector with the 
acquisition of Regency Hospital, the owner and 
operator of Macclesfield's independent Regency 
Hospital, for an initial £l.lm, plus the repay- 
ment of £3.53m of debt 
Regency Hospital is currently registered for 33 
beds, but could increase that number by 17 
“with only relatively minor additional commis- 


sioning costs*, Goldsborough said. In 1993 
Regency made profit before interest and tax of 
£396,000 on turnover of £2 .62m. The profit figure 
was struck after one-off charges of £138,000. 

Subject to the achieving of profit targets for 
1994, Goldsborough will make a deferred pay- 
ment of £l.5m on a pro rata basis. The consider- 
ation will be financed from Goldsborough’s own 
resources. 


Setback for 
Lipton over 
British 
Land stake 


By Vanessa Hotdder, 

Property Correspondent 

The struggle by Mr Stuart 
Lipton, chM executive of Stan- 
hope, to block a deal in which 
British Land acquired a 29J9 
per cent share of Stanhope has 
suffered a setback in the High 
Court 

Mr Justice Vlnelott made an 
order striking out proceedings 
by Mr Lipton’ s private com- 
pany against British Land and 
the Bank of Nova Scotia. Mr 
Lipton bad claim ed pre-emp- 
tion rights over the 29J9 per 
cent stake which British Land 
acquired from the Bank of 
Nova Scotia In March. 

The judge made his decision 
on the grounds that the Upton 
Group's claim disclosed “no 
cause of action”. He refused 
leave to appeal and costs were 
awarded to the defendants. 

Mr Upton has been anxious 
to overturn British Land’s 
acquisition of the stake, which 
is seen as a step to gain con- 
trol of Stanhope's half-share tn 
Broadgate, the (Sty offices. 

Mr Upton says he has the 
right of first refusal to buy the 
stake, originally owned by 
Olympia & York, then pledged 
to the Bank of Nova Scotia. 

Mr Upton was unavailable 
for comment although he is 
understood to be Intent on 
pii ra iri ny frig plnhri further. 


B& J meeting likely to be adjourned 


By Simon Davies 

Today’s extraordinary meeting 
at troubled retailer Brown & 
Jacks on to consider a capital 
injection by Mr Gerald and Mrs 
Vera Weisfeld, will no longer 
mark the Glaswegian couple's 
triumphant return to discount 
retailing. 

A motion to adjourn the 
meeting will probably be 
approved by shareholders, pav- 
ing the way for their later con- 
sideration of a newer bid by 
Pepkor, the South African 
retailer. Pepkoris offer of a cap- 
ital injection of up to £5&2m is 
doable the maximum invest- 
ment by the Weisfelds. 

The Weisfelds. who founded 
the Whatever Everyone Wants 
fifit-htng rhain, have remained 
silent since their offer was 



Cain Bwn 

Vera and Gerald Weisfeld: have some three weeks to counter bid 


gazumped, leaving no indica- 
tion of whether they are pre- 
pared to enter a bidding war. 
The B&J board Is unani- 


mously supporting the Pepkor 
offer, but the Weisfelds have 
more than three weeks to 
counter hid, before the South 


African proposals go before 
shareholders. 

Pepkor would provide a £i2m 
secured five-year trade finance 
agreement In addition, it pro- 
poses to pay £500,000 for lZ5m 
new shares and buy £7.5m of 
secured convertible loan stock, 
convertible Into 187.5m shares. 

It would pay £77.200 for unse- 
cured loan stock, carrying the 
rights to subscribe for 772m 
new shares at 5p. raising 

£38.6m. 

Finally, it would take 
options to buy 128m shares at a 
price of either SL5p. 5p, or ?.5p, 
depending on the timing of 
exercise. This would raise 
between £&2m and £9.6m. 

The Weisfelds were propos- 
ing an initial £6m capital injec- 
tion, and an Investment pack- 
age worth a maximum of saam. 


Yorkshire Water in 
US joint venture 


Yorkshire Water is seeking to 
enter the mulfibiBion dollar 
North American water and 
waste treatment market 
through a joint venture with a 
US contractor. 

The UK group will take a 45 
per cent stake in Ogden York- 
shire Water, with the balance 
to be held by Ogden Projects, 
the waste and energy arm 
of the $2.5bn Ogden 
Corporation. 

The joint venture will 
launch bids for contracts in a 
market which Is expected to 


ABTRIIST ATLAS FUND 
(the "Company ") 

Socktc dlnvcstisscmenl i Capital Variable 
Registered office: 13 roc Goethe, L1637 Luxembourg 
R.C. Luxembourg B-27.Z29 
NOTICE TO SHAREHOLDERS 
The rinrcfcolden are hereby informed due 

An Annual General Meeting of Shareholders at Abinui Allas Fuad will be held at its 
registered n/ficc jr 13. me Goethe, Lujtctnbomg at 2:00 pju. on TTnnwbj 3& May. 1994 for 
the purpose of considering and «King upon the following mamas: 

Agenda; 

!. Acceptance of the Ctainnatfs Rcriew andAudtiort report and approval of Ihe 
financial t**>m**M tar the year ended 31 Janaary. 1994. 

2- Dbrribtuirei of final dividend. 

3. Doduige of the Boonl o( Dbedas and Auditor. 

4. Appointment of an addwottd Director. 

5. Bmbm and re-ckClioa of Director*. 

8. Re-ckcdun of Auditor. 

7. Miscellaneous. 

An ExtruanUnare General Matting of SkarehMen of ABTRUST ATLAS FUND will be 
held at the same address on 26 May. 1994, immedraldy after the Annual General Meeting 
referred to above, for tbe ptaposc of caasufcrinc and voting npon die following matters: 

Agenda: 

If To ctonge die current practice of issuing Skua at a hid and offer price la the issue of 
Shares a! a price based on the net asset value per Share with an initial charge as 
described in the Company^ canon prospectus, and amendment of article 5, 8, 21. 22. 
23 and 24 of the Artides to reflect lids chants. 

2) Deletion of the tot poograpfi of article 5 and amendment of die three Iwr paragraphs of 
aiticle 21 of the Articles, so as lu provide for the pousMity Cw the Board to decide the 
icdemfBKm of alt ausundhig States of the Company, or the tetnunanan of a data, the 
merger between classes of the Company or the merger of a efu* with another 
Luxembourg UCTTS if fhe Board deems it appropri a te beca use of changes in (he 
econo mi c a l or political situation affecting the Company nr the rclcvam class or becanse 
it is in the best interest of the relevant shareholders or if the net asset value of all 
outstanding Shores is lower (ban 10 million US Dalian or its net asset value of any 
cLus is lower dun 50(1,000 US Doflais or its equivalent tn another currency, cite 
lamination of a class or the merger between classes of die Qtmputy or or a etas with 
another Luxembourg UCTTS being otherwise subject lo dan meeting) of the dam or 
dasses In be laminated or Btoged, deliberating validly without quorum and at a simple 
majority vote. 

3) Amendment of ankle 1 1 of Ihe Articles ia order to spe cifica lly provide lor tbe bottling 
of class axelmgs in case decisions are only con ce rni n g the particular rights of tbe 
dtaicholdcn of one or several damn . 

41 A mendme nt of snide 26 of tbe Ankta. so as In provide for the ikcfauatioa of dividends 
on the Shares of each panfolia ai riusi meetings of the relevant daises only. 

5| Amcotharaf of artkk 211 of the Articles to read as follows: 

TV general meeting of dareboiden shall appoint a "revoeor dlencte p ri s e a agrdd* who 
shall cany out the duties prescribed by article R9 of the 19S8 Uw*. 

b) Addnioo of a new paragraph hi article 21 of ihe Articles, after die fifth paragraph , to 
provide foe the possibility for the Board of Directors m accepr redemption in kind. 

7) Mfccettinaws 
IVlMg. 

RcxotMMai on Ihe agenda of tbe Annual General Meeting will requite no quorum and will be 
taken at ihe majority of the voces expressed by (he shareboldcm p r emu t or represented at the 
mectiqg. 

Resnfotinns on Ihe agenda of tbe Eatraoidmary General Meeting require a quorum of one half 
of the Shares ismed and oatstamhng and will be uken at the nnjonty of two thirds of tbe 
wees expressed by the shareholders present ut represented at the meeting. 

To attend ihe meetings, the owncra of hearer Shares are required to deposit their Shoes Eve 
clear davt before the meeting M ihe registered office of the Company. 

I'lVuxc 4rnuigi-mcns; 

StarchuMcn »Csi Cannot attend the meetings in person ate hnrikd to send a duly completed 
and xtgncd proxy form m tbe regnrered office of the Company to arrive IM bter than 24 May. 
I9*w. Proxy forms will be wnt to registered sharcttoidtis with a copy of this Notice and can 
also be churned from the regtelered office. 

TV -Jure holder, arc further in forme J herewith (hat the Hoard of Directon has decided to 
merge certain of Ihe pmfolios of tbe Company with other portfolios of the Company, ns (bey 
deem this to he in the bat interest of tbe sbarebuldcra. 

U* The f 'wteJ Kw&Um r.'ftfufoi will V merged raw the UK Growth of Income Portfolio, (til 
the fwijyiiv t/Wir will he ranged tow the Continental Europe Portfolio and (Ufl the 
Japan SakilUr Ci-n/vurui r,<n(,Jki will be mer ged into the Japan Portfolio. 

Such mourn will bevmne cHcclive one (1) mouth following this Notice. Shareholders of the 
United Kingdom Portfolio, uf the Europnva Portfolio and uf Ac Japan Smaller Companies 
frutfofao wbn do not agree with the mergers are entailed 10 redeem their Shares until ft Jaw. 
1994. free of redemption charge 

On " June. 1"'H ut exchange for Ibeir Shares in the portfolios bong merged all jftareboldea 
not having redeemed their Shares will he entitled to and will automatically receive on 
appropriate number .if Shares to (be ahwifnng portfolios corresponding to their respective 
dure bold iapi in ihe original puolnlinv Continuation advice* of their number of Share* will 
be sear to the shareholder!. The holders of certificated Shares uf the United Kingdom 
ronfotif, nr Ihe Itoropnsa Portfolio and of tV Japan Smaller Companies Portfolio should toco 
return their ccndicaKs to the icgriiercd office ot the Company lo receive new certificate* 
iriknui- Ihcir new shaicbpldiqg. 

TV number nl Share to be allocated to cadi sfaaretaaida: shall V bawd on ihe respective net 
wret value of the atwortriog portfolio and nf the original portfolio ou 7 June, 1994. 

IV «han -hw J iW i of the portlulkn bring absorbed should be aware of the foftjwtng: 

1 Tbe llotlrd Kingdum Portfolio to be absebed by tV UK Growth of Income Portfolio, 
by contribution nf all the assets and liabilities of the United Kingdom Portfolio in the 
UK Growth uf loo one pirtfotio. again* cu tu ri hnliou M the shareholder! of the United 
Kingdom fotHu at an ap p ro priate number of Shares of toe UK Gnnvth of Income 
PnitfolM. propa lit oate to Ihnr xhmrjmlding in IV original portfolio. 

The nnesunent prdky ol the UK Growth ol Income Portfuba a to achieve lung term 
capital growth nf income tbrongh investment* m UK companies which, m total, offer a 
dHuJrnd yield tn eueu nl the yield aradabtc on ihe FT- A Ail Share Index. 

The currency of denomination and the i nvestm e nt advisory fees of both rtv absorbing 
portfolio ami ul the portfolio being absorbed on identical. 

2- TV Enrupriva Ponlollii to V absorbed by the Continental Europe* Portfolio by 
amtrihiikw uf all the McR and lubilbks of the Europnva Portfolio to the Cannneticil 
Europe Portfolio, agairot cotuiftmlaou to the shareholders of the Bnmpnva Portfolio of 
an jpptopriatr number uf dare of the Continental Europe Portfolio, proportionate to 
then share tk4dlag in the on^mal portfoito. 

TV uvcsUncnt policy of IV Continental Europe Portfolio b M achieve tong term 
capital growth thraagh investments in equity securities of co mpe ars whose principal 
xiiuitia are based m CotmaeaDl Europe indnlmg Scandinavia. 

TV currency of denomination of tftti portfolio a Deutschmarir las opposed w the 
Ouupnva Fortfolio's currency of demnmnuiwi which |* Sterling Pounds), The 
ahvnrfiinj: pmtfnlio may be protected against cairency exchange risks by the tan of 
ant!kH»nl hedging techniques. 

TV mvcsnncnj adnsoxy fee itfb«b the jhsuUqg ponfolfo cod of Hr portfolio bemg 
Shrorbed ate identical, 

l a PM SiMlkr Companies Portfolio to he absmbed by IV Japan Portfoihi by 
Amtnbuboa nf all IV assets and liabilities of the Japan Smaller Cofepdftien Portfolio to 
«>r Japan PtwfoUo, agmast cmrtributKni tu Ok jiurebofocn uf rbe Portfolk, of 

an ippmpriatc numVr of shares uf the Japan Portfolio, proportionate to ihcir 
ihaieholdiqg m the anginal portfolio. 

^ *f Wra ° Knl P 0 **^ "* toe top*" Portfolio w to achieve lopg > fn» espial growth dnoegh 
“waoDrnts a etpaty recunnes of companies wine prindpal activities are basrd in Japan. 

af dcnutnlnanun and invesunent advisory foes of both the absartnng portfolio 

“ w U* punfnlm ahsotVd am ideuticil. 

Ut Baud irDMai 
5 May, 1994 


P&P purchase for up to £6. 6m 


P&P, the computer hardware 
supplier and services company, 
is buying Computers for Busi- 
ness (Scotland) for up to £6.6m. 

The company also reported 
an encouraging start to the 
present year to November 30 
1994. 

Profitable contributions con- 
tinued to be made by most 
areas of the business and earn- 


ings were showing Ri gnifirant 
progress. An initial £3.74m for 
913 per cent of CFB will be 
satisfied by the issue of <LSm 
shares, valued at £3.1lm, 
£520.724 in loan notes and 
£108.597 cash. P&P has an 
option to buy the outstanding 
shares for an initial £280,000 
cash. 

A further Elm payment is 


variable depending on net 
assets at completion and there 
is an additional profit-related 
payment to a maximum of 

fff Bm_ 

The additional payments will 
be satisfied by a mixture of 
shares, loan notes and cash. 

CFB reported 1993 pre-tax 
profits of £530057 (£606,000) OH 
turnover of £15m (£12.1m). 


CROSS BORDER M&A DEALS 

BIDDSVMVESTOR 

TARGET 

SECTOR 

VALUE 

COMMENT 

Roche (Swttzeriand) 

Syntax (US) 

Pharmaceuticals 

£3£bn 

Industry restruc- 
turing resumes 

SmithKHne Beecham 
(UK/US) 

Diversified Pharmaceuticals 
Services (US) 

Pharmaceuticals 

£ 1 . 0 x 1 

... with a vengeance 

Electrolux (Sweden) 

Hausgsiate (Germany) 

Household 

appfiances 

E28fim 

Agreement flnatiaed 

WassaB (UK) 

General Cable Carp (US) 

Cables 

£178m 

A bet on America 

Pepkor ( S Africa) 

Brown & Jackson (UK) 

Retailing 

£56 m 

Option tor 63% 
stake 

j^mykim (Belgium) 

Orsan (France) 

Food additives 

£48m 

Lafarge Coppee 
dbposal 

BtoChom Pharma (Canada) 

Unit of Ares-Serorton 
(Switzerland) 

Diagnostics 

£43m 

Another pharmaceu- 
ticals deal 

Aeon Group (Japan) 

Revman Industries (US) 

Household 

£i8m 

Laua Ashley 
sals Its 44% 

Compass (UK) 

Unit ol Saresco (France) 

Catering 

£1Q.7m 

Second buy tn 
a week 

Potypipe (UK) 

Janopiast (France) 

Piping 

£9 An 

Fret buy in Europe 


grow rapidly from next year 
because of increased spending 
and tighter legislation. 

NafWest Securities, tbe UK 
broker, estimates that the 
Clean Water Act, which is 
being proposed in the US, 
could result in increased fend- 
ing next year of $3bn. 

The tighter regulation is 
also expected to force local 
government bodies to torn 
to the private sector to 
manage waste treatment 
facilities. 

Neither partner will inject 
capital initially. Funds will be 
allocated on a project-by-proj- 
ect basis. 

Mr John Bell, managing 
director of Yorkshire Water 
Enterprise, said Ogden would 
bring an already significant 
presence in the municipal 
sector to the joint 
venture. 


Try pays 
£3.7m for 
properties 

Try &oup, the contractor and 
housebuilder, has bought 
Molasses House and Cotton 
Row, at Plantation Wharf, Bat- 
tersea Reach, from the receiv- 
ers of Broadwell Land for 
£3.7m. 

Molasses House will be con- 
verted into luxury apartments 
while Cotton Bow presents an 
opportunity to develop nine 
town houses. Prices will range 
from £90,000 to £250,000. 

CRH expands 
into Belgium 

CRH, the Dublin-based con- 
struction and building materi- 
als group with operations In 


Kays Food relaunches 
flotation proposals 


Kays Food Group, the meat 
processing company, has 
decided to relaunch its flota- 
tion plans, after proposals to 
expand the group through a 
takeover fell through, writes 
Simon Davies. 

Kays produces brand name 
cooked and processed meats, 
wife a clientele which includes 
Fortnum & Mason and British 
Rail 

The company has trodden a 
tangled path towards listing. It 
first planned a reverse take- 
over of textile and leisure com- 
pany Noble Raredon. which is 
controlled by Asil Nadir's sis- 
ter Bilge Nevzat 

This was followed by propos- 
als for a straight placing in 
March, but these were dropped, 
following takeover talks with 
another meat processing com- 
pany. 

Given the felling stock mar- 


NEWS DIGEST 


Ireland, fee UK, fee US and fee 
Netherlands, has expanded 
into Belgium. 

It has bought a 90 per cent 
stake in Mariux Group, a pri- 
vately-owned family business 
which makes decorative pav- 
ing products in concrete. Mar- 
lux is market leader in this 
niche sector in the Benelux 
countries, Germany and 
France. In 1993 sales were 
BFrLSbn (I£26m, or £25.2m 
sterling). 

The remaining 10 per cent of 
Mariux will be retained by the 
family. 

Automotive suffers 
£12Sm losses 

Automotive Products has 
fellen into the red for 1993 wife 
pre-tax losses of £12 .5m. This 
compared with profits of 
£16.2m and was achieved on 
turnover down from £28&5m to 
£246m. 


ket and diminished investor 
appetite for flotations, Kays 
has scaled back its demands cm 
new shareholders. It is issuing 
50m new shares at 5p to raise 
£2.lm net of expenses. 

ft initially planned to raise 
around £4. 5m. This Included 
the sale of an additional 22m 
shares by Mr Fred Andrew, 
Kays’ founder, who has now 
decided to retain his stake. 
Kays will have a market capi- 
talisation of Mm. 

The capital raised will help 
fend a £2.3m factory near Mil- 
ton Keynes, which will boost 
capacity from 3,000 tonnes to 
15,000 tonnes per annum. 

Tbe company is already fac- 
ing capacity constraints, but 
the new production plant will 
not come on stream until fee 
1995-96 year. 

Sponsor to the new shares is 
English Trust 


The directors of this Guthrie 
Corporation offshoot, which is 
a wholly-owned subsidiary of 
BBA Group, said that a diffi- 
cult year was exacerbated by 
continuing overcapacity and 
competition in the aviation 
components business. 

Lasmo 96.5% rights 
issue take-up 

Of the Lasmo rights issue, 
acceptances have been 
received in respect of 2058m 
shares, representing some 96.5 
per cent of the 214.5m new 
shares offered. 

Lombard offer 
closing date 

The intermediaries offer for 
shares in Lombard Insurance 
Group will dose at 10am on 
Friday and trading will com- 
mence on May 18. 


AMER GROUP LTD 


AMER GROUP LTD USD 75,000,000 6 1/4 PER CENT. 
SUBORDINATED CONVERTIBLE BONDS DUE 2003 

Holders of the above-mentioned bonds (the "Bonds’) an? 
hereby notified that Amer Croup Ltd (the "Company") hue 
completed the rights issue of 4,758,491 new A shares. 
Holders of A shares were endtled to subscribe for one A 
share for every four A shares already held and holders or K 
shares were entitled to subscribe Tor one A share for every 
Tour K shares already held. The subscription price was FIM 
1 00 per A share. 

In accordance with Condition 7 (b) (iv) of the Terms and 
Conditions of the Bonds and Clause 9 (B) (iv) of the Trust 
Deed ithc "Trust Deed") dated 15 June 1993 constituting 
the Bonds, Jhe Board of Directors of the Company has 
resolved to adjust the initial Conversion Price Ibr the Bonds 
of FIM 144 per A share to FIM 133.80 effective from 16 
March 1994. 

Capitalised terms used herein have the same meaning as in 
the Trust Deed. 


Helsinki, 6 May 1994 


AMER CROUP LTD 


AKZO NOBEL 


Pursuant to the Dutch Major Holdings In Listed Companies 
Disclosure Act ("Wet Melding Zeggenschap"), 

Akzo Nobel N.V. - formerly Akzo N.V.- states feat It has 
been informed by: Secmim FOrvaltning AB, Regeringsg atari 
39, 1 03 99 Stockholm, Sweden, that said entity is holder of 
shares in the Company equivalent to an interest of 
1 8-2 percent, of which 18.2 percent is designated Indirect 
and 0.0 percent potential. 

Arnhem, May 9. 1994 
Akzo Nobel N.V. 


Cassa di Rispannio di Verona Vicenza 
Belhmo e Ancona 
U.S^lOO, 000,000 

Floating Hate Depositary Receipts Dae 1999 

mot tiro internt pcqrobfo on Hw raJawmt Interest Payment Data Augutl 9, 1 99 A 
Qgqmtf Gauponhb.J2 wSi* USS122.99 jn rejpSof USS 1 ol 

ho tojoipb and USS1 .229.86 m reaped of USSIQO,000 of £e Receipts. 

May9, 1994, London ' ~ 

fly. CUibarA, NA (bjow Services), Agert Bonk 


CmBANC o 








FINANCIAL TIMES MONDAY MAY 9 1994 


19 





‘Hi. 5 r 


Helicopter group 
forecasts big fall 
in losses this year 


By Alice Rawsttiom in Paris 

Eurocopter, the Franco- 
German helicopter company, 
hopes to reduce its losses sig- 
nificantly this year after a very 
difficult year in 1993, according 
to Mr Jean-Franpois Bigay, 

nhalrfnan. 

Mr Bigay said that Euro- 
copter - which is 70 per cent 
owned by A&rospatiale, the 
French aerospace group, and 
30 per cent by Deutsche Aero- 
space, its German counterpart 
- sustained a net loss of 
between FFr350m and FFr400m 
(S6Im-$70m) on turnover of 
around FFrlObn In 1993, the 
worst year for the helicopter 
industry since the 1960s. 

He predicted that the middle 
to late 1990s would be a “criti- 
cal period" for the company, 
which was created in 1991. 
However, Mr Bigay said that 
Eurocopter had already started 
to recover ham its difficulties 
in 1993 and hoped it would 
halve Its net loss this year. 

The industry suffered last 
year from the economic reces- 
sion, which triggered a sub- 


stantial reduction in orders for 
helicopters for civil purposes, 
and from significant cutbacks 

in government expenditure. 

Demand was also affected by 
the problems of the oil indus- 
try which, has been one of the 
main markets. The recent fall 
in the oil price has forced 
many oil groups to cut down 
on orders for new helicopters 
for use on off-shore rigs. 

Eurocopter estimated that 
the number of helicopters sold 
last year was roughly half that 
of the 1,000 sold hi each of the 
previous 10 years. Mr Bigay 
said demand does not appear 
to have improved so far in 
1994. 

The Franco-German com- 
pany also claims that it is 
more vulnerable to downturns 
in demand fhan its US compet- 
itors - Sikorsky and Bell - 
because it does not have the 
benefit of a strong domestic 
market. However, Eurocopter 
does have high hopes for the 
long-term potential of the 
NH90, a new helicopter being 
developed an a pan-European 
basis. 


Mike Walsh, chairman 
of Tenneco, dies 


By Richard Waters 
in New York 

Mr Mike Walsh, chairman of 
Tenneco, the diversified US 
industrial company, died on 
Friday, 16 months after being 
dia gwrw»d as suffering from a 
brain tumour. 

Mr Walsh, 51, was a highly- 
regarded manager who had 
won a reputation as (me of the 
US's foremost turnround 
experts. 

He had been hired by Ten- 
neco in 1991 to help revive the 
fortunes of the ailing company, 
whose activities extend from 
the Case farm machinery com- 
pany to gas pipelines, ship- 
building and packaging. 

By slashing the company’s 
dividend, selling assets and 
taking an axe to its co6ts, he 
returned Tenneco to profitabil- 
ity last year. 

Mr Walsh had spent the pre- 
vious five years at Union 


Pacific Railroad, which he had 
taken through - a similar 
restructuring. But his career in 
industry had begun only in 
1980, when he joined Cummins 
Engine at the age of 38. Before 
that, he had worked in private 
practice as a lawyer and as dis- 
trict attorney in southern Cal- 
ifornia. 

Mr Walsh had stepped down 
as chief executive of Tenneco 
in February, saying at the time 
that his medical treatment was 
impairing his ability to run the 
company. The chief executive's 
position was taken over by Mr 
Dana Mead, then president and 
chief operating officer, who 
had been brought in to Ten- 
neco by Mr Walsh two years 
before. 

Mr Mead was among those 
who paid tribute to Mr Walsh's 
determination. “Mike’s legacy 
is our shared inspiration to 
fight on and never settle for 
second best.” he said. 


COMPANIES AND FINANCE 


Birla ready for multinational challenge 

India’s family-run conglomerate has no fear of competition, writes Stefan Wagstyl 


NEWS IN BRIEF 


Australian 
TV stake 
for TCI 

Tele-Communications, the 
largest US cable company, is 
making a small direct invest- 
ment in Australis Media, the 
stock market-listed Australian 
company which holds one of 
the country's two publicly- 
available satellite broadcast- 
ing licences and has pledged to 
introduce pay-TV services to 
Australia later this year, 
writes Nikki Tait in Sydney. 

The US cable giant is also 
gaining boardroom representa- 
tion at the fledgling Austra- 
lian company. 

TCI is to acquire 6m convert- 
ible debentures at an issue 
price of AS 1.40 each, via its 
wholly-owned TCI-Australia 
subsidiary. 

TCI already holds an indi- 
rect interest in Australis, via 
its interest in Liberty Media, 
which is currently being 
merged into TCI. Liberty 
Media, in turn, owns 49.5 per 
cent of Lenfest Communica- 
tions, which owns 49.9 per 
cent of Australis. 

The net effect of the latest 
investment, pins the complex 
indirect bolding, is to give TCI 
a 26J> per cent economic inter- 
est in Australis. 

■ Broken Hill Proprietary, the 
Australian resources group, 
said Its Canadian minerals 
subsidiary is to go ahead with 
a feasibility study for the first 
diamond mine mi the North- 
west Territories joint venture 
with Canada's Dia Met Miner- 
als, writes Nikki Tait 

■ Sumitomo of Japan and Nor- 
way's Hydro Aluminium group 
are joining forces to exploit 
expected growth in the use of 
aluminium by the world’s 
motor industry, writes John 
Griffiths in London. 

A general co-operation 
agreement has been signed in 
Norway between Sumitomo 
Light Metals, a leading sup- 
plier to the Japanese car 
industry, and Hydro's aluuiin- 
inm extrusion group, whose 
main markets are in Europe 
and North America. 

The launch of Audi’s A8 lux- 
ury car, the first fairly high- 
volume car with an all-alumiu- 
ium body, has encouraged 
forecasts that industry use of 
the material will soar. 


F ew leaders of Indian 
industry are as enthusi- 
astic about their com- 
mercial future as Mr Aditya 
Birla. 

At a recent business confer- 
ence in New Delhi, be gave 
such a rousing summary of 
India's economic prospects 
that he won more applause 
than even the charismatic 
reform-minded finance minis- 
ter, Mr Mnrwnnhan Sfagft 
Mr Birla has good reason to 
feel more optimistic thap most 
As head of a grouping with 
annual sales of over RslOObn 
($3.2bn), he controls one of the 
largest industrial houses in 
Indio , with interests in textiles, 
rhomirais , metals and c ement . 

Moreover, unlike most other 
big family -run groups, Mr Bir- 
la's mmpflTiiflB already have a 
substantial investment over- 
seas — over Half of total 
come from plants in south-east 
Asia, Africa and elsewhere. 
Birla companies made their 
first foreign investment - a 
textile mill In Ethiopia - 35 
years ago. 

Mr Birla says that having 
competed with foreign compa- 
nies abroad he has no fears 
about meeting the challenge of 
the multinationals in India, his 
native land. "We have been 
operating abroad in free mar- 
kets for many years. 1 would 
say competitors should be 
afraid of me." 


Continued from Page 17 


vie Thompson says. The rela- 
tionship between Anglo and De 
Beers - cemented by substan- 
tial OIOSS Bhurphnliting fl - has 

worked well for years and 
there is no reason to suppose It 
will not go on doing so. De 
Beers concentrates on the dia- 
mond business. Anglo will con- 
tinue to invest in diamonds 
through De Beers and continue 
to provide De Beers’ technical 
needs - "that way we can offer 
the people we hire much wider 
scope”. 

De Beers needs a very strong 
balance sheet to be able to 
finance the tro ug hs in rtfamnmd 
demand or sudden increases in 
supply. So it will continue to 
I bubd up investment in “a port- 
I folio of companies competently 


Some other businessmen 
have expressed fears that 
Indian industry might be 
swamped by foreign compa- 
nies, and have urged the gov- 
ernment to protect them from 
the o nslaug ht. Mr Birla says he 
understands these concerns. 

Local groups producing 
branded goods have genuine 
difficulties because multina- 
tionals have “built their 
brands over a 100 years in 100 
countries spending millions of 
dollars". 

These advantages cannot be 
wished away. But Mr Birla 
says that in basic industries - 
including the activities of Birla 
group companies - success is 
mainly determined not by 
brand but by quality and cost- 
competitiveness. “In the sec- 
tors we are in, we can hold our 
own." 

Unlike the small-scale obso- 
lete plants typical of much of 
In dian industry, Mr Birla's 
enterprises compare well with 
the world’s largest He says his 
companies are sixth biggest in 
the world in carbon black, 
third in electrical insulators, 
first in refined palm oO and in 
rayon fibre. 

Mr Birla's companies pro- 
duce rayon in Thailand, Indon- 
esia and the Philippines as well 
as India. His aluminium 
smelter in north India, produc- 
ing over 140,000 tonnes of 
metal a year, is among the 


run, because De Beers’ people 
need to put all their concen- 
tration on diamonds". 

Cashflows will be used for 
businesses the group knows 
well. Anglo's profile might 
change slightly if South Afri- 
can exchange controls are 
removed and it can invest 
abroad. But as Bfinorco is cash- 
rich and unhampered by the 
restrictions, “we are not 
cham pin g at the bit for that to 
happen". 

He suggests South Africa 
should work towards the 
removal of exchange controls 
but “ timing fa everything. We 
cannot run the risk of capital 
being withdrawn In a hurry.” 

The staying power of the 
group is well illustrated by De 
Beers’ Central Selling Organi- 
sation which yesterday wel- 


world's top 15 per cent lowest- 
cost producers. 

The Birla fortunes date back 
to the 19th century, when the 
family moved from its ances- 
tral home in Rajasthan to Cal- 
cutta. the commercial centre of 
British India. Members of the 
Marwari merchant caste, they 
quickly made money trading 
jute and opium and established 
themselves in jute production. 

The family prospered under 
the legendary leadership of Mr 
G. K. Birla, Mr Aditya Birla's 
grandfather, who dominated 
the business for more than 60 
years until his death in 1983. 

Control of Birla companies is 
spread among about six family 
branches, but Mr Aditya Birla 
was singled out for special 
favour by his grandfather 
because of his precocious busi- 
ness talents and he was 
bequeathed the best of the 
group. 

M r Aditya Birla partic- 
ularly impressed his 
grandfather by 
expanding overseas in the 
1960s and 1970s, when the 
socialist- Inspired governments 
in New Delhi tried to curb the 
domestic expansion of large 
groups. 

Mr Aditya Birla's main listed 
companies, in which the family 
holds 20 to ») per cent of the 
equity, are Grasim Industries 
(cement, textiles, and caustic 


corned clients from all over the 
world for a 60th anniversary 
party. 

After last year's record per- 
formance - CSO sales reached 
&L4bn (£3bn), some 5 per cent 
ahead of the previous record in 
1988 - the diamond market 
“opened firm" this year, says 
Mr Ogilvie Thompson. Never- 
theless, De Beers faces same 
substantial challenges. 

It is still restricting the 
quantities of stones it takes 
from producers who belong to 
the cartel - only 85 per cent of 
those contracted for. This is a 
dear sign that supply contin- 
ues to outpace demand. And 
stocks are already high - De 
Beers’ own have a book value 
of about $4bn and probably 
have a much higher market 
value. 


soda). Hindalco industries (alu- 
minium), Indian Rayon and 
Industries (rayon, carbon 
black) and Indo Gulf Fertilisers 
and Chemicals (urea-based fer- 
tilisers). 

The group is in the midst of 
important investment plans, 
put together before Mr P. V. 
Narasimha Rao, the prime min- 
ister. launched economic 
reform in 1991 but which have 
since been brought forward 
and expanded. 

Altogether, Mr Birla's com- 
panies are spending Rs70bn 
over the next three years. Hin- 
dalco, which is spending 
Rsl2£bn, is expanding output 
of refined aluminium by 40,000 
tonnes a year to 210,000 tonnes 
and installing a new rolling 

mill 

Grasim is spending Rsl-l.5bn 
on expanding production of 
cement (it is India's largest 
manufacturer) and rayon and 
on a recently-completed sponge 
iron plant In the western state 
of Maharashtra. 

Indian Rayon, Indo-gulf Fer- 
tilisers and smaller companies 
also plan expansion and new 
ventures ranging from soft- 
ware exports to producing 
magnesia from sea water. 

However, even these projects 
are dwarfed by Mr Birla’s plan 
to build a Rs27 Jbn oil refinery 
with an annual capacity of 3m 
tonnes of crude in Mangalore, 
on the south-west coast 


But the biggest threat to the 
cartel is Russia, which supplies 
about 25 per cent of the world's 
gem diamonds by value, and 
whose contract with the CSO 
runs out next year. Mr Ogilvie 
Thompson has already scolded 
the Russians for selling dia- 
monds from their stocks “in 
contravention of our agree- 
ments”. 

He says most of those offi- 
cials in Russia who have been 
In the diamond business for 
years want to stay with the 
CSO. 

Others, such as Mr Yevgeny 
Bychkov, head of Komdragmet, 
the Russian diamond and pre- 
cious stones committee, "are 
not totally committed. We have 
18 months to convince them 
that it is in their best inter- 
ests." 


Formed as a joint venture 
with Hindustan Petroleum, a 
state-owned oil company, the 
plant is expected to come on 
stream in 1996. 

To help fund these schemes, 
Birla group companies have 

raised some $423m through 
Euro-equity issues in the past 
18 months and intend to raise a 
further $200m. 

M r Birla rejects sug- 
gestions that the 
group is becoming 
too diverse. He runs his empire 
by delegating decision-making 
to the operating companies, 
while remaining in overall 
charge of the direction the 
businesses take. 

He keeps in touch with 
financial performance by a reg- 
ular reporting of cash positions 
- using a system developed by 
the Marwari caste. 

Mr Birla is now so confident 
of India's Tuture that his over- 
seas companies are putting 
capital into the Indian opera- 
tion - reversing the flow of 
previous years. 

His main immediate concern 
about the Indian economy is 
inflation, which has risen 
sharply in the past year from 
below 7 per cent to over 10 per 
cent for wholesale prices. 

Mr Birla says: “We have to 
ensure that our costs don't go 
up with inflation if we are to 
remain competitive." 


Correction 

Khalid Salem Bin 
Mahfouz 

In an article in the 
International Companies and 
Finance section of May 5 1994 
headed “Mexican Banker Faces 
Civil Action”, we wrongly 
described Mr Mahfouz as hav- 
ing pleaded guilty to charges 
arising out of the “BCCI inves- 
tigation”. 

We accept that last Decem- 
ber the New York County Dis- 
trict Attorney and the Federal 
Reserve dropped all federal 
and state criminal and civil 
charges against Khalid Bin 
Mahfouz in connection with 
their BCCI investigation. 

We apologise to Mr Mahfouz 
for any distress or embarrass- 
ment that may have been 
caused to him and his family 
by the error. 


African empire open to the world 



••ill' 



HSBC <S> 


Introducing 


HSBC Securities, Inc. 

formerly 

Carroll McEntee & McGinley Incorporated 

HSBC Futures, Inc. 

formerly 

CM&M Futures Inc. 

HSBC Futures (Singapore) Pte Ltd. 

formerly 

CM&M Futures (Singapore) Pte Ltd. 

and 

HSBC GreenweU 

formerly 

GreenweU Montagu Gilt-Edged 


The HSBC Group offers worldwide experience, knowledge 
and expertise in all capital markets businesses. 

As long-term members of the Group, we thank you for your support 
and look forward to serving your global financial needs with 
our new HSBC identities . 



Santander Investment 


We are pleased to announce the opening 
of our Banco Santander de Negocios, London Branch, at: 


office address 
1 Bishopsgate 
London EC2N 3AB 


Telephone: (071) 220 76 10 
Facsmile: (071) 220 76 53 



Santander Investment 


Your experienced partner in emerging markets 


New York* * London * Tokyo • Hong Kong ■ Madrid- Mibin • Lisbon 'Mexico D.F. * Caracas -Saa Paulo • Buenos Aires • Santiago de Chile 

* Unit of Banco Santander Branch 

• Banco Santander de Negocios - Member of the SFA 








Global Investor / Martin Dickson in New York 


Total rwtum In local currency to 8/B/M 


Fed credibility on the line 


- - % cfongvomr P*W • 
us . JapM Qanamg Roaoi 


Gash 

Wee k 0.07 

Month 032 

Year 351 


ft* m 


The US Federal 
Reserve could 
move as early 

as this mor ning 

to raise 
short-term 
interest rates, 
for if it fails to 
provide rapid 
reassurance to a very jittery 
market It may face a week of 
tumbling stock and bond 
prices ami further weakening 
of the dollar. 

There can be no doubt that a 
Fed tightening is imminent 
What remains unclear is 
whether the central bank will 
wait until the next meeting of 
Its policy-making Open Market 
Committee, on Tuesday of next 
week, and how large a rate rise 
it will sanction. There is a pow- 
erful case for immediate, 
strong action. 

Last Friday's better-than-ex- 
pected April employment fig- 
ures prices, which so badly 
spooked the bond market, dem- 
onstrated that the US economy 
Is growing vigorously - proba- 
bly at a 3.5 to 4 per cent annual 
rate - and so far showing few 
signs of the more modest per- 
formance widely predicted for 
later this year. 

While inflation remains sub- 
dued for now. the current 3.75 
per cent Fed funds rate is still 
a considerable way from the 
neutral rate the Fed is aiming 
for, which arguably lies in the 
4J5 per cent range. 

The persistent rise in bond 
yields since February’s initial 
tightening, and last Friday's 
jump - the biggest one day 
increase since the Gulf war - 
show that the market simply 
does not trust the bank's pol- 
icy of incremental, 25 basis 
point increases in Fed funds as 
an inflation-fighting instru- 
ment 

Its anxiety is being height- 
ened by the Clinton adminis- 
tration's nomination of Mr 
Alan Blinder as Fed vice chair- 
man, given his reputation 
(deserved or not) for softness 
on inflation. 

Fed tightening early this 


US 30 year Long bond / 


Percent 
75 -= 




m. • ■ ■ 




Source OtfastrawD 


week could restate a measure 
of calm to the bond market 
and would also clear the air 
ahead of this week's $29bn of 
Treasury auctions, starting 
with tomorrow’s sale of three- 
year notes. 

Whenever the bank acts, the 
general expectation is that it 
will put at least 25 basis points 
on Fed funds and increase the 
discount rate for the first time 
in this cycle, with a 50 basis 
point rise. But a 50 basis point 
increase in both rates would 
send a much better anti-infla- 
tion signal to the markets. 

The politicians would hate it, 
and so might stocks, but a firm 
demonstration of resolve could 
lay the baas for an eventual 
rally at the long end of the 
bond market 

It would also help underpin 
the dollar, at least in the short 
term. While longer-term struc- 
tural factors (including a deep- 
ening current account deficit 
and outflow of investment 
funds) may explain much of 
the dollar’s unexpected weak- 


ness, the recent plunge in the 
currency Is due in no small 
measure to lack of confidence 
in US monetary policy. 


Commodities 


The surge in international 
commodity prices on Friday 
also represented a vote of no 
confidence in the Fed’s anti-in- 
flation credentials as specula- 
tive funds poured into a broad 
range of assets, fnrinrffng pre- 
cious metals, copper, coffee 
and oiL 

However, the bull run hid a 
range of differing fundamental 
factors in the various markets 
which suggest it is too soon in 
the current cycle to expect a 
sustained surge in across-the 
-board prices - though the 
long-term trend is upwards. 

Gold, in particular, would be 
vulnerable to a decisive tight- 
ening move by the Fed. Copper 
prices may stay firm thanks to 
the strength of the US econ- 
omy and glimmerings of Euro- 
pean recovery, but increased 


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IN FOREIGN EXCHANGE 


As a global institution, Lehman Brothers has 
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•H-7I-Wl>9i07 


New York Hong Kong 

8473 S5M25 7 1 93 

liiwl by Uhihjo Brudim InTtfraiwrul iEun pi. j njrmhrr rt Sf A. £l IS 94 Uhun Brothers he. 


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Dollar 


Against the Yon (V per $) 
1/ 130 




— 110 


supply later in the year could 
have a depressing impact on 
the market 

The rnffpp rally, which bus 
taken prices up by nearly 40 
per cent since the start of the 
year on supply constraints, 
may be due for a correction, 
though the outlook remains 
fundamentally strong. 

OH, having rallied by more 
than $4 a barrel since mid-Feb- 
ruary, was further buoyed last 
week by fi ghting in the Yemen 
and output problems in the 
North Sea. The Yemen is not a 
big producer, and the markets 
should rapidly adjust to any 
supply disruptions. But Indica- 
tions of higbftr global demand 
in the srepnri half of thin year 
- underscored in a report last 
week from the International 
Energy Agency - should help 
underpin the market’s rally. 


■ Kodak 

Shareholders in Eastman 
Kodak will gather this Wednes- 
day fay - the «ttnpan y*«- annual 


r ftpgtTng in xnnch better spirits 
than for very many years. Mr 
George Fisher, chairman since 
December, has moved rapidly 
to reverse a decade of mis- 
guided diversification which 
has left the group with a heavy 
debt burden and lacklustre 
earnings growth. 

The first fruits of the new 
management style Were put Oil 
display for Wall Street analysts 
last week when Mr Fisher 
announced plans to sell off 
three big businesses, including 
Sterling Drug, the pharmaceu- 
ticals business Kodak bought 
far $5.Zbn in 19SS. 

Fisher's plan, which squares 
with what the investment com- 
munity has been urging Kodak 
to do for years, is to concen- 
trate the company's re sources 
on its core imaging business. 
That means both squeezing 
better earnings out of its con- 
ventional silver halide photo- 
graphic business, through cost 
cutting and market share 
g ains , and focusing, more 
energy on digital photography. 


which some forecasts reckon 
could account for 25 per cent of 
the image market by the turn 
of the century. 

However, Kodak’s new vig- 
our does not make the stock a 
strong buy. The disposals look 
like being fairly neutral for 
pummg s , and Kodak sh ares, 
which stand plump in the mid- 
dle of their 52 week range, are 
not particularly cheap, with a 
prospective p/e ratio of 16. 

Mr Fisher is promising to 
boost the return an net assets 
from about 6 per cent last year 
to at least 12 per cent by 1999. 
He should be able to take 
plenty of fat out of the pater- 
nalistic company's cost struc- 
ture, but Kodak's traditional 
flim business faces increasing 
competition from branded 
rivals ifltB Japan's Fuji and pri- 
vate label manufacturers such 
as 3M. 

And while Mr Fisher’s high 
technology background - as 
former chief executive of Moto- 
rola - holds promise for the 

di gital imag in g bUSfilBSS, there 

are no signs yet of this sector 
malting a substantial contribu- 
tion to group profits. 


Bonds 3-5 
Weak 
Month 
Yaar 


Bonda 7-10 
Week > 
Month 
Year 


Equities 

%M§ L. 

wuw 

Month 

Year 


But performing stock* from FT-A World —dfcod - 
in local currency to 8/5/94 

% cfcane* 

Ctoer Week Month 


Syntax Corp. (USA) 
NL Industries (USA) 


Pohjorta A (Rn) 
Vard{Nof) 


Scientific Atlantic (USA) 
Comcast Corp^USA) 


Fondaria (Ha) 
Pubfc Bank (Mai) 


Annco (USA) 
Pharmads (Swe) 


Sowf*rCmtv«. Bands - tahmn Bathe* Equate* - O NeCWwt SeeurtBe*. 

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■ Kemper 

Kemper’s agreement yesterday 
to open negotiations with Gen- 
eral Electric an a $60 a share 
takeover bid looks good both 
for GE and the holders of 
Kemper shares - some 10 per 
cent of whom are based in 
Europe. 

GE, which has faced persis- 
tent rebuffs from Kemper's 

manflgpmgnt , will finally get a 
rhanra to look at the compa- 
ny’s books and determine 
whether its property portfolio 
is sufficiently cleaned up to 
rnwrit a formal fondra- offer at 
this level 

If so, a takeover will give GE 
a powerful leg up hi the fund 
management business. 

Kemper, for its part, has 
managed to get GE to increase 
its offer from $55 a share to 
$60, and its management 
avoids what was likely to have 


been an embarrassing defeat at 
its aramal meeting - due this 
Wednesday but now put off 
until August 

GE, in an effort to get 
Komppr to open bid negotia- 
tions, had submitted an annual 
meeting resolution to put four 
of its nominees on the board in 
{dace of Kemper directors up 
for re-election, including Mr 
David Mathis, the chainnan. 

Investors had a strong inter- 
est in voting for GE, since fail- 
ure of the resolution would 
have probably sent Kemper's 
shares tumbfing back towards 
the $40 level at which they 
were trading before GE first 
made a bid approach. 

That was because GE was 
unlikely to launch a hostile 
tender offer and there were no 
signs that GE’s activity would 
flush out a rival offer. 


Kemper’s agreement to talk 
just days ahead of the annual 
meeting mirrors the white flag 
displayed in similar circum- 
stances three years ago by 
computer company NCR, 
which after mouths of stone- 
walling opened negotiations 
with hostile bidder AT&T 
shortly before an annual meet- 
ing vote on the composition of 
its board. 

Like NCR’s stone-walling, 
Kemper’s two months of 
rebuffing GE has served share- 
holders welL Its submission 
now is a sensible acknowledge- 
ment that the time has come to 
talk. It also removes the possi- 
bility that Mr Mathis might 
have lost his job on Wednesday 
- hardly an outcome to 
strengthen Kemper’s hand in 
the hard bargaining that may 
yet lie ahead. 


Economic Eye / Martin Wolf 

Dealing with the emerging 
Chinese giant 


Under the rule 
of Deng Xiao- 
ping. the long 
slumber of 
China, home to 
a fifth of the 
world’s popula- 
tion, has 
ended. This 
creates possibly the most 
important policy challenge fac- 
ing the West Significant deci- 
sions - over whether to renew 
China’s MFN (most-favoured 
nation) status in the US, for 
example, and on what terms to 
let it into the General Agree- 
ment on Tariffs and Trade - 
must soon be taken. 

The issues are expounded 
with clarity and common sense 
in a recent monograph by Mr 
Nicholas Lardy, professor at 
the University of Washington, 
and a well known expert on 
the Chinese economy.* Prof 
Lardy recognises the difficulty 
posed for the rest of the world 
by a country that Is so large 
and economically dynamic, but 
remains under the control of a 
distasteful communist regime. 
Fortunately, experience else- 
where in east Asia suggests 
that democracy ultimately fol- 
lows introduction of a success- 
ful market economy, though 
with a significant lag. 

Partly for this reason, the 
remarkable economic develop- 
ment under way needs to be 
supported. The Chinese econ- 
omy grew at an annual aver- 
age rate of 9.4 per cent between 
1980 and 1991. The explosion in 
its foreign trade (shown in the 
chart) means that China’s 
share in world exports rose 
from 0.9 per cent in 1980 to 23 
per cent in 1992. In 1973, China 
was the world's 20th largest 
exporter, by 1985, it was 15th; 
and by 1992, it was 11th (10th, 

if Hong Kong's reexports are 
excluded). 

Prof Lardy tries to assuage 
the alarm this performance has 
awakened. He argues, for 
example, that China is not yet 
and is not likely soon to 
become an economic super- 
power. Similarly, he notes that 
China is, in important respects, 
more open to the world econ- 
omy than were Japan, South 
Korea and Taiwan at compara- 
ble levels of development 

How large is the Chinese 
economy? The highest estimate 
of income per head at interna- 
tional prices is $2,600, which 
would make the economy sec- 
ond largest in the world. If 


China’s emergence on the world trade stage 


China’s foreign merchants*© trade* $bn 

120 — — ; 


Wm Exports 
□ Iraparti 


40 


197879 80 81 82 88 ft." 89 87 88 88 80 9* 82 98 94" 

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US trade deficit WtthCritaa, $bn : 

2Q — ; 


■■ Officfeur reported US deficit ( 
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ism so- 

Souck Suna dtod in Lady 


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recent rates of growth were 
extrapolated, C hina would 
overtake the US by 2010. 
Against this. Prof Lardy argues 
that China's real inmmA per 
head is only about $1,000, no 
higher than India’s. He also 
argues that supercharged 
growth is unlikely to be sus- 
tained after the year 2000. 
Should the gr owt h rate tell to 5 
per cent, China’s output would 
not exceed that of the US until 
2040. 

These arguments seem 
mutually inconsistent If Chi- 
na’s real income is as low as 
Prof Lardy suggests, its poten- 
tial must also be greater. 
China would then only be 
where south Korea was a quar- 
ter of a century ago. Since th e n 
the latter's economy has grown 
at close to 10 per cent per 
annum. Furthermore, the 
handicaps Prof lardy points to 
- high levels of public owner- 
ship, bankrupt hanks and con- 
tinuing dependence on foreign 
entrepreneurship and capital - 
suggest that the rewards of far- 
ther reform could be huge. 


Much, however, depends on 
the rest of the world. Here Prof 
Lardy’s arguments are more 
persuasive. He notes, for exam- 
ple, that China received an 
inflow of foreign direct invest- 
ment in 1993 of $26bn, up from 
$5bn in 1991. in 1993, more 
than a quarter of China’s 
exports were from foreign-in- 
vested firms, which accounted 
for 70 per emit of total export 

growth. Processing of duty-free 
Imports into exports is also 
more important for China than 
for other east Asian countries. 

These facts, along with the 
role of Hong Kong as an entre- 
pot, make the US administra- 
tion's beloved statistics on 
bilateral deficits more mean- 
ingless thin usual. A correc- 
tion for US exports to nhinq 
through Hong Kong, and for 
the value-added in Hong Kong 
on US imports from filling Js 
shown in the chart. But sup- 
pose a US export is incorpo- 
rated into something made in 
Taiwan that is further pro- 
cessed in China. US bilateral 
trade statistics would miss th fo 


altogether. It Is interesting, 
therefore, that the US deficit 
with China. Hong Kong and 
Taiwan, taken together, has 
changed little since 1987. 

China has, in short, an 
increasingly open economy, 
one that specialises on the 
basis of its comparative advan- 
tage and imports as much as it 
exports. It needs to be encour- 
aged to proceed further 
towards becoming a transpar- 
ent. market-based economic 
regime. Such a regime would, 
of necessity, also increase the 
legal rights of the Chinese 
themselves, precisely what the 
West is supposed to want 

Prof Lardy’s recommenda- 
tions include: 

• abandoning the use of the 
bilateral trade imbalance as an 
indicator of the degree of open- 
ness of the Chinese economy: 

• working for China’s early 
entrance into the Gatt, prefera- 
bly before the end of this year 
(which would make it a foun- 
ding member of the World 
Trade Organisation); and 

• providing China with per- 
manent MFN status in the US. 

All this makes eminent 
sense. Withdrawing MFN, for 
exa mp le, could be catastrophic 
for US bilateral trade: the 
World Bank estimates China’s 
exports would then have fallen 
by between $7bn and $15bn in 
1990. But it would also be an 
act of economic warfere; devas- 
tating to those Chinese who 
are pushing for reform, or ben- 
efit from it 

Furthering China’s long-term 
integration into the world 
economy would increase its 
direct stake in stability and 
make it more likely that China 
would co-operate on nonecon- 
omic issues as well, argues 
Prof Lardy. Against this view, 
Anthony Lake. President Clin- 
ton's national security adviser,; 
has designated China a “back- 
lash" state, along with Iran 
and Iraq. This Is a ridiculous 
parallel, partly because ' the. 
course of Chinese economic’ 
development promises sou- 
thing very different. More ftftv 
dameo tally, China cannot; Hke : 
Iran and Iraq, be quarantine 
The question is what sort of. 
great power China will tome 
out to be. The China the West 
will experience is likely ft be 
the China the West deserves. .. 

* Nicholas R. Lardy, China in 
the World Economy (Washing- 
ton D.G Institute far Interna- 
tional Economics, April J994X 




Markei 


SWrtJB-.'VST'.w**: 

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FINANCIAL TIMES MONDAY MAY 9 1994 


21 



*sie % 


EMERGING MARKETS: This Week 


1 « rt , 


“■'5 




The Emerging Investor / Nicholas Denton and Chrystia Freeland in Budapest 

Socialists’ return greeted with equanimity 


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Electoral victories by the left 
make markets and investors 
jittery all over the world. In 
eastern Europe, where this 
weekend Hungary’s socialists 
look set to follow their Polish 
comrades back to power, the 
prospect is superficially even 
more alarming. For the 
region's socialists are the suc- 
cessors of the communist par- 
ties whose economic manage- 
ment, or rather mismanage- 
ment, condemned their coun- 
tries to relative backwardness. 

However, foreign investors 
and their Hungarian advisers 
are reacting to the left’s resur- 
gence with remarkable equa- 
nimity. “I don’t think anyone 
outside the country is realty 
concerned about the clock 
being turned bade.” says Mr 
Janos Bartha. chief executive 
of CS First Boston Budapest, 
the Hungarian branch of the 
mtamatfanal investment hawk 

The Left Alliance, which 
came back to power in Poland 
last autumn, has won the con- 


■ Science of western investors by 
continuing the orthodox eco- 
nomic policies of its non-com- 
munist predecessors. 

The Polish stock market's 
hectic rise continued after the 
Mi’s triumph and ended 1933 
with a 900 per cent year-on- 
year gain. The equally dra- 
matic 50 per cent crash this 
spring bad much more to do 
with inflated price/eamings 
ratios than politics. 

Lfkewise, Hungary's bourse, 
which rose sharply in January, 
fell ba ck and is now moving 
sideways, is not expected to 
change course. On the last day 
of trading before yesterday's 
vote the market was flat Vol- 
ume touched a low for 1994 
with only Ftl3.lm ($130,000) 
worth of shares changing 
hands. 

The price of compensation 
coupons, the certificates far a 
politically driven privatisation 
programme of the governing 
cons er vat i ves opposed by the 
socialists, foil to a near historic 



Ten best perfcwranlng stocks 


,i| 

l K t 


RUV 

Weak bo weak 

>l— T 

-. . 

; Stack 

Cmcntry 

dan 

S 

% 


Aksa Akrfik Ve Kknya Sanayb 

Turkey 

1.1015 

02910 

35-91 


Koc Yatrtrn 

Turkey 

1.1304 

02911 

34.68 


*•* - Guney Brecfllk 

Turkey 

0-8696 

01894 

ZIJ3S 


Eregli Dercir Ve Cefik 

Turkey 

0.1406 

0.0306 

27.82 

• . ” 

' — Turk Damir Dokum 

Turkey 

03841 

00802 

2037 


Doktas 

Turkey 

0.2725 

00554 


- 

Kortiosa 

Turkey 

0.1913 

0.0379 

24.71 

Hji,, 

< Alarto Hokfing 

Turkey 

04433 

00875 

24.18 


• Yapi Ve Kredi Barfcasi 

Twkay 

00609 

00109 

21 SB. 


Aygaz 

Turkey 

0^145 

0.0379 

21.49 





Soick Baring 

Secuttea 


low. Otherwise the Budapest 
Stock Rrchang p Index hardly 
moved, aiding 0.13 up on the 
day at 1620.78. 

Mr Zsigmond Jarai, head of 
the Budapest nffiw of UK mer- 
chant bank Samuel Montagu, 
speaks far most analysts when 
he predicts; “My expectation is 
that nothing will ha ppen to the 
market.” 

Indeed, some analysts, 
including Mr Jarai, believe a 
socialist government could 
even be an improvement 

One ex-communist who 
inspires their confidence is Mr 
Laszlo Bekesi. fanner and per- 
haps fixture finance minis ter in 
a socialist government Mr 
Betas! sees economic policy in 
starkly pragmatic terms: “The 
options are not those of conser- 
vative, liberal or social demo- 
cratic policies. There are only 
two alternatives: realistic and 

imrpaligrin ” 

In an interview with the FT 
he proclaimed his belief in 
firytting the exchange rate and 
relying on private finance of 
Infrastructure projects, and he 
favoured fire sales of unprofita- 
ble state companies. Even Mr 
Bekesi’s pledge to stop Hunga- 
ry's fledgling mass privatisa- 
tion programme wins marks. 

Like the prodigal son, the 
socialists are prepared to bend 
over backwards to win the 
trust of western investors. 

Mr Bekesi and his fellow 
technocrats represent the reas- 
suring face of the socialists. 
T-ggg visible, but perhaps more 
powerful, are the trade unions 


Johannesburg Exchange committed to reform 


Hie Johannesburg stock exchange announced 
its intention to reform itself last week writes 
Mark Suzman m Johannesburg. 

In a report - expected to be legislated by the 
new government later this year - the authori- 
ties declared their commitment to overall 
restructuring of operations, with emphasis on 
increasing market participation by both for- 
eigners and black investors. 

The exchange wifi ran a series of investor 
workshops and encourage the listing of small 
black companies, while also permitting Umlted 
corporate membership and some foreign owner- 
ship of local brokerages for the first time. 

After years of sanctions and isolation, during 
which many overseas buyers, particularly 
Americans, stopped even considering South 
African stocks, interest has resurfaced over the 

past dt mrmfhc 

The recent boom, which has seen the major 
indices hit a series of new highs, has been 
largely foreign driven. 


Several specialist Africa funds have been 
formed, most notably Morgan Stanley’s $60m 
Africa Fund and Alliance Capital Manage- 
ment’s SI 00m Southern Africa fund, both of 
which are overwhelmingly concentrated on the 
South African market More are expected. 

As South Africa is increasingly added to 
global market indices, such the IFC data base 
on emerging markets, a greater proportion of 
international investment capital will almost 
certainly make its way to the country. 

With a current market capitalisation in the 
region of $X60bn, the exchange is the 11th larg- 
est globally, and much more mature and sophis- 
ticated than most comparable markets in the 
developing world. 

With foreigners expected to be allowed to 
participate shortly, it is already widely 
rumoured that major London firms have 
expressed interest in partnership with local 
brokerages, a move that will likely generate 
farther foreign business down the line. 


which underpin the party 
organisation and put jobs and 
wages above the painful pro- 
cess of economic restructuring. 

And, however restrained the 
programme and public pro- 
nouncements of the socialists, 
many of their s u pp o rters are 
hoping for an immediate rise 
in their living standards. “The 
socialists say they will build 
capitalism, but when they say 
capitalism the Hungarian peo- 
ple hear socialism,” says Mr 
Peter Tolgyessy, a leader of the 
liberal Alliance of Free Demo- 
crats, a potential coalition 
partner for the socialists. 

In Poland, the Left Alliance 


government’s austerity has 
angered industrial workers 
who swung to the left in the 
belief that it would temper 
Poland's h?r *?h new capitalism. 
This disillusionment helped 
inspire strikes which are jeop- 
ardising economic recovery, as 
well as the left's reputed abil- 
ity to maintain social peace. 

An additinnai danger in Hun- 
gary is that the return of for- 
mer communists to power will 
provoke the extreme national- 
ist right to resort to desperate 
action. Mr Ferenc Kuhn, leader 
of the parliamentary group at 
the governing Hungarian Dem- 
ocratic Forum, warns: “West- 


CURRENCY MARKETS 


Market focus remains on dollar 


Cl'iliP.S 


The dollar looks set to remain 
the focus of attention this 
week after widespread central 
bank intervention last Wednes- 
day to support tire US cur- 
rency. 

The market is watching to 
see what action the US Federal 
Reserve and the Bundesbank 
take to shift Interest rates in a 
way likely to support last 
week's intervention effort, and 
the dollar. 

The initial focus is on the US 
Federal Reserve. Many in the 
market believe there is a good 
chance the Fed will raise rates 
today. If not today, then by 
May 17 when the pohey-mak- 
ing Federal Open Market Com- 
mittee meets. 

If excuse for tightening were 


needed, it came last Friday in 
the form of buoyant April 
employment figures. Jobs rose 
by 267,000, compared with a 
market forecast of 170.000, pro- 
viding confirmation that the 
US economy continues to grow 
strongly. 

The refunding on Tuesday 
and Wednesday of S29bn of 
US treasuries is also likely to 
play an important part in the 
Fed’s thinking. If the risk of 
the dollar weakening is still 
substantial, then overseas 
investors are less likely to par- 
ticipate. 

April PPI and CPI data are 
aim likely to jnflnenre mone- 
tary policy. 

A firm view has emerged in 
the market that a decisive 


move from the Fed is neces- 
sary to curb the dollar’s 
decline, and arrest the related 
weakness in the US bond mar- 
ket 

This would involve the dis- 
count and federal funds rates 
rising by 50 basis points. 

So for. in the three policy 
tightenings over the past three 
months, the Fed has moved 
rates in 25 basis point incre- 
ments. 

However, analysts argue that 
this is destabilising for the dol- 
lar and US asset markets as it 
leaves investors perpetually 
waiting for the next tighten- 
ing. 

The argument for a decisive 
move is that it would calm 
market nerves if it was suffi- 


cient to show that interest 
rates have reached a medium- 
term plateau. 

The discount rate is cur- 
rently 3 per cent, and the Fed 
funds rate 3.75 per cent 

Another key factor in the 
fate of the dollar is the Bundes- 
bank. Were the German cen- 
tral hank to cut its discount 
rate at its comical meeting on 
Wednesday, this should Tend 
support to the dollar by shift- 
ing the interest rate differen- 
tial in the US’s favour. 

Sterling will also be in focus 
following last week's drubbing 
in local elections for the Con- 
servative Party. Mr John 
Major, the prime minister, has 
made it dear that he will resist 
pressure to resign, but the 


Dollar 

Agab8tthe6M.(pNrperi) 

1.87. 



154 


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Sough: FT GW**** 


• • J • 5 

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instability of his position is 
likely to put a dampener on 
the pound. 


FT GUIDE TO WORLD CURRENCIES 


The table Mow flhms tt» latest avafiabie rates of mtetanga (rowdecQ against tour Key euronotes on Friday, May 6, 1984 . In 

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Free flights to Japan. 

Join JAL Mileage Bank Europe and new members who 
book and complete an Executive Class return journey to Japan 
before 30th June 1994 can get an Economy Class return free. 
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J AIsa 

Japan Airlines 

JAL tmUEABE BANK europe 


era investors don’t have any 
moral and political worries, 
because they have just one 
interest, an economic interest 
But they don’t realise that 
with a socialist victory, social 
stability will be in danger." 

However, even alarmist 
statements like these do not 
ruffle the confidence of west- 
ern investors. That is the true 
measure of ehp transformation 
in eastern Europe: western 
observers are convinced coun- 
tries like Hungary have irre- 
versibly opted for capitalism 
even if the leaders they choose 
call themselves, for old time ’s 
sake, socialists. 



News round-up 



Turkey 


Equities finished last week 
higher after another volatile 
ride in previous sessions as 
the country’s parliament 
passed laws on tax and 
privatisation which are among 
the government’s main efforts 
to reduce the budget deficit 
The privatisation law allows 
the cabinet decree powers for 
three months to sell off state 
companies. 

• The World Bank has 
approved a SI 00m loan for the 
privatisation programme. The 
loan bad been suspended in 
March because of worries over 

the financial crisis, 

■ China 

The Bank of New York has 
forecast that China will 
become its most important new 
market for American 
Depositary Receipts within 
the next three to five years. 
agencies report. 

A bank spokesperson said 
that between 10 and 12 Chinese 
companies would establish 
ADR programmes in the US 
during 1994. 

• China’s economic problems 
and the introduction of new 
taxes h*g dampened the 
ShgfiThpn B share market, with 


an indicative measure - Credit 
Lyonnais Securities Asia’s 
Shenzhen B index - at, or 
around, year lows. 

Commentators observe that 
there is little incentive for 
foreigners to come into the 
market at present with 
overseas institutions mainly 
targeting the Shanghai market, 
which has a much larger 
ca pitalisation. 

In Shenzhen daily turnover 
is estimated at 0.05 per cent 
of total market capitalisation. 
Last Thursday, for instance, 
turnover was just KK$800.000. 

■ India 

The country's financial 
markets are expected to 
remain under pressure 
following the cancellation of 
VSNL's Euro issue last week. 
However. BaUarpur, the 
country’s biggest papermaker, 
has said that it has no 
immediate intenetion to delay 
its proposed S35m Eurobond 
issue with plans to launch it 
later in the month. 

The company said it would 
take a derision this week. 

• Farther coverage of 
emerging markets appears 
daily on the World Stock 
Markets page. 


Baring Securities emerging markets indices 


6/5/94 


Week on week movement 
Actual 


Month on month movement 
Actual Percent 


Year to date movement 
Actual Percent 


World (239) 

Lath America 

Argentina (19) 

Brazil (21) 

Chile (12) 

Mexico (24) 

Latin America (76) . 
Europe 
Greece (14) 
Portugal (14) 
Turkey (22) 

Europe (50) 

Asia 

Indonesia (20) 
Korea (2 3) 

Malaysia (22) 
Pakistan (10) 
PhBppines (1 1) 
Thailand (22) 
Taiwan (30) 

Asia (138) 


.147.10 

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-47.41 

-28.31 

-19.61 

-14.04 

165.17 

-3.69 

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11.91 

7.77 

17.63 

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132.58 

-6^7 

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0.49 

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1.56 

1.71 

9.52 

11.46 

118.01 

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-7.12 

5.88 

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0.98 

-0.16 

-0.11 

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128.45 

434 

3.91 

15.82 

14JJ4 

18.75 

17.09 

207.40 

-6J>6 

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9.16 

4.62 

-45.65 

-18.04 

113JJ3 

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-0.89 

-1J8 

-1.38 

1.33 

1.19 

287.94 

15.62 

5.74 

29.14 

11J6 

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205.27 

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5.67 

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13J8 

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0.00 

0.00 

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6J7 

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-12.86 


A» Men h 5 mna, Januvy 7lh 1982-100. Soucac Botes Beaten 


SEK 


AB Svensk Exportkredit 

(Sm <fa5 Gate CnpMmJ 

tl*orpt w 4 few TV Kiffa— cf 


HK$J 00,000,000 

Reverse Floating Rate 
Notes dne 1998 

R«r the tnteresr Period 5th M»y, 
1994 to 5th August. 1994, the 
Notes will carry an Interest Rate 
of 4.31874% per annum with 
Coupon Amounts of HK 
51.068.56 and HW10.885.59 
per HKS 100,000 and HK 
$1,000,000 Notes respectively. 
TKe relevant Interest Payment 
Date will be 5th August. 1994. 




Company, London AftaiBatei 


MONTREAL 
TRUSTCO INC. 
B a wp o ate nfatefauKfato 


FloBllaB Bala Debentures 
Due 1994 

lateral an - 345*, 

ImasBt paiodl ram -&5.1994 
to -S.II.I99* 
Intend Amount pa ¥1 00000.000 
8.11.1994-in 5*0X22 


Agon Bank 

TV Laos-Ten*, CrtdM Bank 
of Japan, UwKtd 

Tokyo 



IS* ntmeMTInes ranches 
aere »enlw European 
executive* with capital 
narfwta respoiwMMy than any 
other Europe** PoMeatton-* 

If yoa vrlalt to reach thla 
Influential audience by 
advertising la the Savvey 
pteaae contact: 

HM KMT (New Vo*) 

T«t (212) 764 4600 fcc (212) Sit 67M 

HANNAH PURSALL (London) 

Teli 071 873-067 ta 071 8734078 

SARAH PAKBtHMRWALSH (Hong Konfl 

iw: (682)8882083 Ffao (8SZ) 637 32U 


FT Surveys 


MERCURY SELECTED TRUST 

(SICAV) 

Retiteered Office: 14, roe Um Thyes. 

L-2636 Luxembourg. 

R-C Lonaboerg: BA317. 

NOTICE OF- ANNUAL GENERAL MEETING OF SHAREHOLDERS 

Hie Annual General Meeting of shareholders of Mercury Selected Trust wiD be held ai 
14, roe L4oa Thyes, Lusanbotey at 1 1.00 a.m. on 2S*b May. 1994 tor the propose of 
ruo ri df rin g and voting upon the fonowing mutcrv 


To accept the Directorc' mod Auditors' repairs and to adof* the financial 
Matemenis for the year ended 31st December. 1993. 

To dec tare such dividends for the year ended 31st December. 1993 as may be 
recom m ended by the Bond in acctarfance with the dividend policy of the 
Company and to fi* their line of payment. 

To discharge the Director fan their responsibilities for nil actions taken within 
their manri at r during the year ended 31a December. 1993 and to approve ihar 
icmunuation. 

To re-cicct the Directors and set the maximum number of Directors ai eighteen. 
To discharge die Auditors from their responsibilities for all actioas taken within 
their nsaadaie during tbeyenr ended 3 la December. 1993. 

To re-elect the Anditora. 

To decide re any other busiaen which may properly come before the Meeting. 


Voting 

Res oluti ons may be passed without a nninim. by a simple majority of the votes cast 
thereon at the Meeting. 

Voting Arrangements 

The bolderc of bearer dares must deposit their stares not Later dun 20th May. 1994 
either n the registered office of the company, or with any bunk or financial instjtnrion 
acceptable to the company, and the relative deposit receipt (which may be obtained 
from the re gistered office and the paying agents of the company) must be forwarded to 
the re^stered office of the company id arrive not later than 20di May, 199-1. The shares 
so deposited will remain blocked until the day after the meeting or any adjournment 
thereof. 

The holders of registered shares need not deposit their certificates hot can be present in 
person or rep resented by 6 duly appointed proxy. 

Shorehokfen who cannot unend the meeting in person are invited to send a duly 
completed and signed proxy form [o the registered office of the company to arrive not 
bter than CQth May, 1994. Proxy forms for use by registered sbandiolders arc Included 
with the annual report and can alao be obtained from the registered office. A person 
appointed a proxy need not be a bolder of shares In the company; lodging of a proxy 
farm win not prevent a shareholder from attending the meeting if be decides to do so. 

Audited Animal Report 

Copies of the Company's Annual Report for ibe financial year ended 31st December. 
1993 are available from ibe registered office and the paying agents. 


9th May. 1594 


The Board of Directors 


NOTICE OF REDEMPTION 

Haemal finaBcfera, S.M.C., Trust Dnisim 
asTrestea of ttaa Rafin Finance Tnst 
toaranteed Ftoathg Rate late Dm mr 
G 0 SV No. 62 S 718 -AA 5 * 

NOnCEE HEREBYGWEN, pursuant to ttic Indenture dated as ofD ccm bg 
15, 1992 under which the above described Notes were issued that National 
Rnanrisa, SN.C, Trust Division, as Trustee of the Nafia Rnanoe Trust will 
redeaa on June 15, 1994, &8065537l439%of theOutotereJing Principal Amount 

of the Notes, anuxirtfirg to $9,460,000.00 on a pro rata basis in accordance with 


On June IS, 1994, there will become due and payable 
amount, together with interest accrued to June 15, 1994. On arti after such date 
interest will cease to accrue an the Notes (or portion thereof so redeemed). 

Payment* redemption amotrt plus accmed Interest on Bearer Notes 
will be made upon presoitetion and surrender at the appropriate coupon to one 
of the Paying Agents listed below 

Q titanic, N-A. Gtibank fLuxanbottre) SJL 

336 The Strand 16 Avenue Marie-Therese 

London, WC2R1HB Grand Dudty of Luxembourg 

England Luxembourg 

Cttbank, HJL, as Note Trustee 

May 9, 1994 

*T«s CUSP wdxr has ban assignat by Standard & Poet "s Cmpontirat and is 
in du df dH tyJwiheari mk iKzafthehaUera. Nodto-ftr Issuer tor the Note Trustee 
shaB beropmsikfor thrsdcctim aruseaftkeCUSIP monte r, mraanyraresottatieu 
made rate tis correctness on Ok Notes or as mdlatUd in this notice. 

NOTICE 

As of January 1, 1993, withholding of 31% of grew i 
g^mmmtenriihin the United States mnyberaquheabyttiel 


■ of 1986, as emended by the Energy 1 


. interest 

Revenue 

of 1992. unless die 

. . (social security or t 

number) or exemption certificate of Ihe Payee Please furnish a 
property completed Form W-9 or exemptian Cririi finite or equivalait whm 
presenting you securities. 













iaifei -• . 



KTTsf A.NCTAL TIMES MONDAY MAY 9 1994 



NEW YORK 


N6t for the first time, the US 
bond market Is starting tbs 
week Hke a paralysed, rabbit 
caught in the glare of a car’s 


The onrush of the next 
Federal Reserve tightening 
transfixed the mar ket last 
Friday: the April employment 
report with lis strong gains 
in job numbers, wiped more 
than two points off the price 

of the 30-year Treasury bond, 
driving the yield to over 7.5 
percent 

With the Fed choosing not 
to act last Friday, the market 
has been Left grappling with 
the likely timing of the next 
interest rate increase. 

This will happen today, in 
the view of some an Wall 
Street, or at the latest on 
Tuesday of next week, when 
the Federal Open Market 
Committee holds Its next 
meeting to discuss interest 
rate policy. 

By the time the committee 
meets, it win also have the 
latest retail sales data and 
producer and consumer price 


Richard Waters 


OS • • 

Bencftmaffcytotd curved s ‘ 
aew — . Monotttq «= •“ 



ft . ..-MOyoart Jft 
-AB ytafcta ttannWt o onu mfon ; 
Soun»«wrttMnch 


figures at its disposal 

The April producer price 
index, due to be announced 
this Thursday, is expected to 
be up by 0.1 to 0.2 per cent, 
after a rise of 0.2 per cent in 
March, while the consumer 
price index is expected to rise 
by 0.3 per cent, as in each of 
the previous two months. 

Retail sales In April are 
expected to have risen by 0.3 
to 0.4 per cent, moderating 
slightly from the levels of the 
previous two months. 


LONDON 


An already glum gilt-edged 
market is unlikely to receive 
much support from tomorrow’s 
Bank of England Inflation 
report, while the teltout from 
last week's UK local electi o n s 
la expected to deter investors. 

Mr John Shepperd, chief 
economist of Yamaichi 
Inte rnational in tanritm, 
believes there is enough 
medium-term anxiety about 
inflation for the Bank to adopt 
a cautionary tone. In 
particular, the recent slight 
acceleration in pay increases 
could encourage the Bank to 
emphasise longer-term 
inflationary risks. 

The market's attention, could 
shift to flm dfn g arithmetic by 
the end of week, Mr Simon 
Briscoe, UK economist at 
S. G. Warburg Securities, 
believes. Although this year’s 
PSBR will be lower than the 
£46bn of 1993-94. political 

uncertainty and medium-term 
inflation worries make a repeat 
of last year's heavy £23bn 
foreign gOt purchases an 
unlikely bet at present 


Peter Norman 











451 1 — 

• i- 

- f . 1 

i'- ■ . 


'O- fi -yon »■■■» -38 
-MyMdftOTmrMoonvwtfcn 
SotfPceMflnSILancti ■ . ■ ■ 


The Bank's next auction 
announcement is due on 
Friday. With the yield curve 
abnormally steep (the 10-year 
benchmark bond ended last 
week yielding &21 per cent 
against base rates of 5^5 per 
cent), Mr Shepperd believes 
the Bank may opt for another 
floating-rate issue. A 
convertible with an option to 
convert from a short to a 
long gilt would be another 
way to overcome current 
uncertainties. 


FRANKFURT 


Early this week, the hund 
market is Kfcely to sufEer 
repercussions from Friday’s 
sharp increase in yields cm US 
government securities, 
triggered by data showing 
faster than expected growth 
in US employment 

m theory, the bund market 
should move Independently 
of US Treasuries, as German 
interest rates axe due to tell 
further, in stark contrast 
to the US where further 
rate increases are now 
expected. 

However, the German 
market will need proof of the 
course of German rates and 
wffl watch the outcome of this 
week’s repo rate operations 
to see whether the Bundesbank 
is prepared to let this key rate 
drop substa ntially from its 5.41 
per emit level. 

The nearer the repo rale 
moves to the discount rate - 
currently standing at 5 per 
ront - the more the market 
win be convinced that further 
cuts in the discount rate are 
Imminent 


David Waller 



ft 10 yr* 20 

TUj^awmrtMtoonwntton 
Sowoot ManS lyncti 


The Bundesbank's 
policy-making council meets 
an Wednesday, brought 
forward a day because of a 
public holiday on Thursday. 

Few expect the German 
central bank to seize the 
opp o rtun ity to cut the discount 
rate - the consensus is that 
the next cut will coma later 
in the T Tir>rit ^ at the earliest 
- but the Bundesbank may 
stay true to its habit of cutting 
rates when the markets least 
expect it 


TOKYO 


Fluctuations in the Japanese 
band market this week will 
depend heavily on currency 
movements - especially the 
yen’s strength. 

If the dollar stabilises 


Emiko Tc-r^~o r 


intervention, pwflfrtaklng may 
hurt bond prices. However, 

the yen is unMhdy to plunge 

and its continued strength, 

in the Y1QQ to YlOB range 
against the dollar, is expected 
to weigh on profits of 
corporations dependent on 

exports. 



continued economic weakzuss 
pnri alugginih IwftpHnm wfll 

continue to keep the bond 

market well underpinned,” 

says DKB International. If the 

yen appreciates further, hopes 

of a cut in the official discount 

rate, or at least an easing in 

short-term rates, will rise. 

The official view on the yen’s 

strength is expected to be aired 

on Wednesday by Mr Yasushi 

Mieno, the governor of the 

Bank of Japan. 


Asset allocation by domestic 
institutions, which have 

expressed caution, over the 

increased risk in the stock 
market, is expected to provide 

support tor the bond market. 

With concerns of ovarsupply 

rfrw» to increased municipal 
Issues gradually receding, bond 
prices may receive a boost 

from such purchases. 

Meanwhile, traders say tbs 
bond market’s upside is limited 
to lyfnMwnflri turmoil in 

TTS ffnara-lnl ninrira tn. 





Capital & Credit / Sara Webb 


Looking to the longer term on Europe 


The US Treasury bond market 
has provided much of the 
inspiration for Europe this 
year. What with three hikes in 
short-term US interest rates 
since early February, and the 
prospect of a fourth in the 
immediate future, US Treasury 
bond prices have plummeted, 
h>Mng the European markets 
down in their wake. 

The release on Friday of 
stronger than expected US 
employment figures for April, 
coupled with the recent weak- 
ness in the US dollar, means 
that global bond markets are 
braced once again for another 
rise in US Interest rates, possi- 
bly as early as this week. 

At the same rime, the Euro- 
pean government bond mar- 
kets appear determined to 
focus on any "bond-negative" 
news on the home front, such 
as signs of a stronger than 
expected recovery in Germany. 

While the volatile market 
conditions this year have made 
trading in European govern- 
ment bond markets a diffimit 
task on a day-to-day basis, 
those with a longer time per- 
spective - the economists and 
fund managers - still cling to 


the hope that once the bond 
market shake-out finally shud- 
ders to a halt, sensible eco- 
nomic fundamentals will take 
over once again as the driving 
force for Europe. 

Strategy-wise, fund manag- 
ers claim they are keeping to 
the core European bond mar- 
kets of Germany and France, 
as they see inflation staying 
low and expect European inter- 
est rates to fall further. At the 
cawj rimo ] they are studiously 
avoiding the volatile high- 
yielders such as Italy and 
Spain, and prefer to steer clear 
of the UK economy which is 
further ahead in the recovery 
cycle than the rest of Europe. 

"People have seen the turn 
in the Interest rate cycle In the 
US and see it as only a matter 
Of *rmp before that liH ppgns in 
Europe: however, that's too 
simplistic,” said one European 
fund manager. 

"You have to bear in mind 
that the dynamics of the situa- 
tion in Europe are very differ- 
ent from those In the US. hi 
the US, interest rates are ris- 
ing, and probably should be 
rising more rapidly than they 
are, given the inflationary 


pressures. But Europe is differ- 
ent: the inflation background 
Is improving flr| d even though 
there is going to be some mod- 
est recovery in the European 
economies, it won't be so 
strong as to be a worry with 
respect to inflation," 

Mr Nick Henderson, fixed 
income manager at Gartmore, 
says he has been increasing 
the duration of his European 
government bond portfolio dur- 
ing the turbulent past few 
months, shifting along the 
yield curve, for example into 
the liquid 30-year French and 
German bends, as well as into 
long-dated Ecu issues. 

“We have gradually been 
lengthening our maturity in 
the global bond markets 
because continental Europe 
offers good value. We still see 
inflation remaining very low, 
so implied real yields for long- 
dated bonds are attractive,” 
says Mr Henderson. 

Meanwhile, Mr Jonathan 
Kelly, frypd income manager at 
Fidelity, sees "a lot of value in 
the very short end of European 
yield curves," namely in matu- 
rities of less than one year. 
"Three-month Euro contracts 


are unduly pessimistic, as they 
are predicting vary high inter- 
est rates" he says, adding: TPs 
my opinion Interest rates will 
continue downwards at the 
short-end in Europe.” 

While some of the economic 
data which has come out of 
Germany recently has sparked 
nervous selling in the bund 
market - on the grounds that 
it suggests the Germany eco- 
nomic recovery Is stronger 
than bad been predicted - fond 
managers and economists are 
fairing a fatr iy sanguine view. 

Mr George Magnus, chief 
international economist at 
S.G. Warburg Securities, says: 
Tm sympathetic to the stron- 
ger growth story in Europe, 
but I also think the market is 
making a bit too much of it 
We are looking at a stranger 
trajectory for economic 
growth, but there are impor- 
tant caveats.” He makes the 
point that German economic 
growth is “bond-friendly . . . iPs 
an export-led expansion, with 
consumer spending and credit 
expansion playing very limited 
roles.” 

Mr Werner Krfimer, bond 
strategist at DB Research, 


Deutsche Bank’s research sub- 
sidiary in Frankfurt, says he 
does not expect stronger 
growth to affect the outiodk for 
rate cuts in Germany and its 
neighbours. 

“The inflation outiodk won’t 
change - if anything, given the 
dollar's current weakness, the 
Bundesbank may accelerate its 
rate cuts to support other cen- 
tral banks in their intervention, 
efforts. At the vary least, it will 
stick to its current pace of eas- 
ing,” he says 

"The market is right in 
thinking we're getting dose to 
the trough [m interest rates], 
but iPs absolutely mistaken in 
thinking of interest rates 
increases” in the near future, 
says Warburg’s Mr Magnus. 

However, he acknowledges 
that a lot depends an the direc- 
tion Of the US market: “If the 
long bond stabilises around 7% 
to TA per cent and investors 
start buying again, Europe win 
enjoy better times. Whatever 
the longer-term view, there’s 
going to be a period in the next 
several months where life w ID 
become easier. Maybe the sum- 
mer months will provide a pos- 
itive surprise.” 



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MOWS) 

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to tbe balden: of the 
X904NMWHN) 

per cart. Convertible Bonds due 2UOS 
(U« '“Bunds”) 
or 

LASMO pic 

(the “Company^ 

Adjustment of Conversion Price 

Notice is hereby given that, following the Rigbu Issue of 2I-MJ4.472 new 
ortiuur)- shares on a i2 for 7 basis announced by (be Cbmpany on (3ih April. 
1994. the Comersion Price of the Bondi has, in ^ccurdancc with the 
Supplement! Trust Deed doted 4* October, 1990 cqntdtuting the Beads, 
been adjusted from pence per Ordinary Share to 541 pence per Ortfinary 
Share with effect horn 1 3th April, 1994. 


May 9 , 1994 


LASMO pic 


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International I John Murray Brown 

IMF agreement vital for Turkey 


Turkey's foreign debt strategy 
is under the spotlight again as 
Turkish officiate continue their 
talks with the International 
Monetary Fund an a possible 
stand-by facility. 

Agreement with tbe Fund is 
vital to restore domestic confi- 
dence in the battered Turkish 
lira and the austerity pro- 
gramme of the prime minister, 
Mrs Tansu Ciller. 

An accord would also do 
much to dispel the growing 
mutterings from the market 
that the republic could- be 
pushed to meet its foreign obli- 
gations in the c urr ent crisis. 

Turkey’s total outstanding 
foreign debt - public and pri- 
vate - stood at $66bn at tbe 
end cf September 3S98, up from 
$5Sbn at the end of 1992. 

The country has to repay 
around SSbn of medium and 
long-term debt in 1994. Around 
$16bn. or 27 per cent of total 
debt, is short-term - the matu- 
rity structure having worsened 
sharply with- the big increase 
in commercial borrowings by 
banks to finance last year’s 
record 28 per cent jump in 
imports. Even with a sharp 
drop in imports this year, some 
of the repayment will need to 
be rolled over. 

Turkey wffl. certainly benefit 
from a more robust picture on 
the current account With the 
austerity pr o gr amm e, imports 
are expected to come back 
sharply from the record of 
$29bn in 1993, while official* 
are projecting a 12 per cent 
increase In export revenues to 
Il7fibn. 

After a record deficit in 1993 
of SfUhn, Mr Necati Ozfirat tbe 
head of the State Planning 
Organisation, says the current 
account should be in balance 
in the current year. 

More encouraging, Turkey's 
international reserves appear 
to be growing, according to fig- 
ures released last week. 


Since the announcement of 
the April 5 austerity package, 
central bank reserves have 
risen from $3.03bn to $3J3im on 
April 29, although this still 
represents only a little over 
one month’s import cover. 
Also, commercial bank 
reserves at around S9.4bn, will 
only be accessible by means of 
further severe monetary tight- 
ening, 

Turkey’s policy options are 
thus constrained. In the wake 
of the rise in US interest rates, 
emerging market borrowers 


by S. G. Warburg and priced to 
yield 230 basis points over 
gilts, is now being offered at 
around GOO basis points over 
gihs - and there are no buyers. 

Much will depend an tire out- 
come of Turkey’s negotiations 
with the IMF. IT the talks frul, a 
rescheduling of Turkish debt 
see m s unavoidable. 

On the other hand, if the 
sides can agree a letter of 
intent, tmf offiriaTa have indi- 
cated that up to $45Qm may be 
released as a one-year standby 
facility. 


'• ;■ .T.m. 

“ 



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gcui^Ti^Th»w^ 


like Turkey have gone out of 
favour. 

When Turkey pulled a 3750m 
global band in March , uncer- 
tainty mounted. This has since 
been exacerbated by Islamic 
gains in the March municipal 
elections and nagging doubts 
over the ability of the prime 
minister to implement tbe 


Underscoring those doubts, 
Standard & Poor’s has just 
downgraded Turkey for the 
third ttme this year, from BB 
to B+. Turkey rematos-an Cre- 
dztWatch, which all but rules 
out an early return to tbe bond 
markets. 

Traders say its £225m 10-year 

bond deal, launched last year 


The government says It is 
also considering a club loan 
with US hanfa which is likely 
to provide shortterm financ- 
ing. 

That stai leaves at least $3bn 
of maturing debt to cover. 
Some bankers believe the mul- 
tilateral and bilateral official 
creditors will be flexible In 
rolling over repayments. 

"This time. I don’t think Tur- 
key can borrow its way out of 
the problem. Equity is the only 
way to go. For the fixed-rate 
investor, there is just not 
flruHigh information/’ said one 
US banker. 

The government hopes to 
raise CSLSbn from the sale of 
state assets in 1994. The plan 


was given a boost last week 
with Parliament, approving an 
enabling bill which empowers 
the government to use decrees 
for three months to prepare 
state compani e s for sale. 

However, tbe government’s 
recent sale of a minority stake 
in Totes, the Fiat car subsid- 
iary, did not set a very con- 
vincing benchmark. The issue 
raised around 1850m, compared 
with bankers’ earlier estimates 
closer to 5700m before the cur- 
rency collapsed, losing more 
than 60 pa cent against the 
dollar since the start of tbe 
year. 

Chase Manhattan is now 
leading a consortium, also 
comprising KLeinwort Benson 
and fttimnnn Brothers, to pre- 
pare the state refinery corpora- 
tion Tupjras and the petrol 
retail company Petrol Ofisr for 
sale. CS First Boston has been 
mandated to prepare the state- 
owned Erdemir Iron and Steel 
works for privatisation. - 

S.G. Warburg confirms that 
plans for a tSLSbn convertible 
issue in the state owned tele- 
communications company are 
also s tiff under consideration, 
although it may be some time 
before the markets are ready 
fear such a deal. 

There is almost £& much anx- 
iety over whether Turkey’s pri- 
vate banks will be able to refin- 
ance their short-term 
liabili t ies. Much of this is trade 
finance and many have 
healthy reserves. However, 
traders say that market senti- 
ment could be badly affected if 
the authorities foil to settle the 
$200m owed to foreign credi- 
tors by the three Turkish 
banks that were closed down 
last m onth. 

As one London based dealer 
put it "We're not looking at 
year-end numbers, we’re won- 
dering whether Turkey can 
make it through the next six 
months.” 


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FINANCIAL TIMES MONDAY MAY 9 1994 


EQUITY MARKETS: This Week 



NEWYORK 


Wall Street 
steels itself 
for long wait 

It is a disheartening irony, but until 
the economy shows unmistakable 
signs of cooling, the share prices of 
those companies best positioned to 
benefit from steady growth - and 
lead the market to a sustained rally 
- are likely to continue falling. 

In the aftermath of Friday's news 
of a surprising jump in April 
employment levels, a sense of 
resignation is han g in g over Wall 

Street this mo rning . After flirting 
with the notion that the worst was 
over, many investors are now 
convinced the market has a long way 
to go before hitting bottom. 

“We don't have much leadership, 
we've got a very weak bond market 
and very good potential that stocks 
are going to be under pressure in 
the near term,” says Mr Ricky 
Harrington, technical analyst at 
Interstate/Johnson Lane in Charlotte. 

“We are probably going to stay 
in a corrective phase until there is 
some solid evidence the economy 
has slowed.” agrees Mr Thomas 
McManus, stock strategist at Morgan 
Stanley in New York. 

Consumer and producer price data, 
due out later in the week, could help, 
but it is doubtful, regardless of the 
actual numbers. A look back at last 
month's price trends is hardly 
instructive for investors seeking to 
gauge inflation a year from now. 

Ever since the Federal Reserve 
last raised rates on April 18, 
economists have warned that a fourth 
increase was only a matter of time. 
Yet Wall Street had been growing 
confident that the next ti ghtening 
when it came, would satisfy the Fed’s 
intention of establishing a “neutral" 
monetary policy, although that 
remains undefined. 

Amiri this cautiOUS op timism , the 
blue chip index showed a net gain 


Frank McGurty 


Dow Jones Industrial Average 


3720 -■ - 



29 .ft|ay199« 6 

Souse: FT Graphlta 

of 14 points in the Gist four sessions 
of last week, despite the dollar's 
unsettling weakness and its 
depressing Implications for an already 
soured Treasury market 

However, the April payroll number 
has forced investors to rethink their 
positions. It showed nan-farm 
employers taking cm 267,000 more 
workers last month, against forecasts 
of a 160,000 gain. Stocks dropped on 
the news, recovered and lurched 
downward again after it became 
apparent that the Fed would not 
mak e its move before the weekend. 

“The two greatest foes of stocks 
are rising rates and uncertainty," 
points out Mr Eugene PeronL an 
analyst at Janney Montgomery Scott 
in Philadelphia. Both bogeymen 
loomed larger on Friday and the Dow 
was 26 points down on the session. 

Wall Street is betting heavily on 
the Fed striking thfo morning. The 
reaction may depend an the bank’s 
aggressiveness. A fourth 25 basis 
point increase is likely to be a 

rtiaappnintmant to a marit«»fr h o pin g 
a gahigt hope that the ti ghtening 
sequence is to be completed soon. 

The tribulations of the dollar, 
meanwhile, remain a distracting 
sideshow. Further darfineg are 
possible today, analysts say, 
especially in view of the currency’s 
steftriinaaa as bonds plunged on 
Friday. As with monetary policy, 
the stock market’s concern over the 
rinTTar jj based more on thp shifting 
lawisrapp than its actual value. 


LONDON 


Investors fail 
to focus on 
recovery signs 

If the stock market cannot respond 
to almost daily evidence of economic 
recovery, then it clearly has its eyes 
on other matters. Last week’s higher 
dividend payouts from British , 
Petroleum and Bank of Scotland, 
excellent first-quarter profits at BAT 
Industries and a handful erf mega 
tr ansatlan tic deals should all have 
pointed the way to a healthier 
market; yet, the overall performance 
of market indices was still 
disappointing. 

One reason is that the market's 
nervousness is self-feeding. 
Market-makers, fearful of being 
cangfit but by a highly volatile equity 
sector, cut share price quotations 
hard whenever they think they see 
trouble ah«ad. The institutions are 
equally sensitive and, after taking 
aboard a steady flow of placings and 
rights issues in the first quarter of 
the year, have now become relatively 
unreceptive to new issues. More 
worrying were the indications last 
week that same large overseas 
investors were lightening their 
hnMing g in UK stocks. 

The market is clearly gun-shy, or 
perhaps dollar-shy would be more 
explicit. In mid-week and again on 
Friday afternoon, share prices went 
into reverse very quickly when 
threats to the dollar revived fears 
that the Federal Reserve would raise 
interest rates to defend the dollar. 

Some analysts argue that the weak 
pound, which usually follows a weak 
dollar in present conditions, has in 
the past been quite good for share 
prices. If the dollar gets into trouble 
again this week, then UK bonds will 
fall and the Footsie 3,100 mark will 
be at hazard a gain. 

With the outlook for the market 
so uncertain, there are signs that 
institutional investors are looking 


Terr/ Byland 


FT-SE-A AR Shaw Index 



1,550 1 1 ■ > • * « 

29 Way 1994 6 

Squok FTGraptee 

carefully at existing portfolios and 
endeavouring to identify sectors 
which retain some attractions. In 
many cases, these attractions are 
there only because the shares were 
left out of the huge jump in equity 
prices earlier this year - for which 
the market is now paying dear. 

This hag put the pharmaceutical 
sector back into the limeli ght after 
nearly two years in which fund 
managers probably wished the shares 
had ceased to exist The sector still 
trades at a substantial discount but 
not much worse than it did 12 months 
ago when it was hit by worries over 
the Clinton tightening erf US 
healthcare costs. 

Now, with SmithKllne Beecham 
paying S2.3bn for a US drug firm and 
European buyers focusing on the 
impending sale of Ra stman Kodak’s 
$5bn plus pharmaceutical division, 
the sector looks interesting again. 

Smith KBPS is buyin g a 
Pharmaceutical Benefit Manager, 
a new animal for UK investors. BZW 
concedes that the move will mean 
modest earnings dilution this year 
but expects “superior growth” from 
the combined group thereafter. For 
the sector as a whole, there is the 
hope that the SmithKHne deal will 
provide the recovery trigger for which 
the market has been waiting. 

The question must be whether 
these latest developments will bring 
a general revaluation of the sector 
which hag remained decidedly out 
of favour with UK analysts. 


MDICESATAQLAim 

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. 3,106i0‘. 

' / -0.7 •. 


" : -0.1 • 

3.52030= 

2/2/94 ! 2,78030 8/5/83 

3,52030 

. 2/2/94 

30)7050 

4/5/94 

Dow Jones IntL . 

3669.50 

+6.6 

-23 

- -a3 

3.97036 

31/1/W 3/425.12 29/4/93 

’3,978.36 

31/1/94 

3.59X35 

. .4/4/04 

Nikkei • 

. 19,862.47 

; +0.7’.' 


'*.+14.6 21,148.11 ' 

13/B/93 16^7071. 2MVQ3 20.6T7.77 

16W/94. 17^69.74 

4/1/94 

Dax 

2^37-02 

‘ -0=4' . .. 

. +37.8 ' 

■ “1-3. 

2,268.65 

2/5/94 1,603.04 24^5/93 

2,268.65 

2i 5/B4- 

2^20^33 

2/a«4 

CAC 40 

2,15a22 . 

..*-0.4 


. '4.8 

2^55J93 

2/2/94 1,835.72 17/5/S3 

2,355L93 

2/2/94 

2^8.134 

31/3/94 

Bance Com. ItaL ' 

80094:; 

■; • ^ 

■ 

+29.3 

813 .63 

27/4/94 508D1 . 16/6/93 

81363 

27/4/94 

588.85 

10/1/94, 


9 mc« FT.Gr*f#U» 


OTHER MARKETS 


FRANKFURT 

Speculation about the outlook for 
interest rates is growing ahead of 
the Bundesbank council's fortnightly 
meeting, brought forward to 
Wednesday because of Thursday's 
Ascension Day holiday which will 
leave many European markets closed. 
James Capel says that the recent 
strength of the D-Mark and cuts in 
the repo rate already totalling 29 
hasis points since the last discount 
rate reduction on April 14, point to 
a further decline in the discount rate, 
perhaps of 50 basis points, and 
possibly this week. 

Veba reports first-quarter figures 
tomorrow, with NatWest Securities 
forecasting net profits up to DM253m 
from DM202m. 


ZURICH 

Full-year figures for 1993 are expected 
this week from Winterthur and 
Zurich Insurance. UBS expects 
Winterthur to report a 27.5 per cent 
jump in net profits to SFr315m and 
Zurich to post a 15 per cent rise to 
SFr565m. The investment bank 
expects double-figure earnings growth 
from the leading insurers in naming 
years. 

Roche holds its annual news 
conference on 1993 results tomorrow. 
Roche certificates have been under 
pressure since the group announced 
results almost three weeks ago and 
there was further weakness last week 
after it announced a $5-3bn bid for 
Syntex, the US drugs group. However, 
analysts have noted that the drop 
in the price would have been even 
bigger without the continued support 
Of Mr Mar tin Elmer's BZ ftflnlr 


AMSTERDAM 

First-quarter figures are due on 
Wednesday from Aegon and Royal 
Dutch. Unilever reports first-quarter 
results on Friday. Hoare Govett 
estimates Aegon’s operating income 
will rise by 8 per cent and expects 
a further profits increase in ail 
insurance fines. Hie broker wpwt; 
Royal Dutch's net profits will dip 
to £900m from £971m in the same 
1993 period while slightly higher sales 
and margins should boost Unilever’s 
ea rning s par sharp to FI 2138 from 
F12JJ6. 


TOKYO 

A brief less ening in the strength of 
the yen may encourage some 
institutional investors wanting to 
begin allocating this year’s funds 
in the stock market 
However, with the currency factor 

remaining mirar-tern and the s tar t 

of the earnings season starting next 
week, many investors may remain 
on' the sidelines. 




i 


FINANCIAL TIMES CONFERENCES 



World Aerospace 
and Air Transport 

The Next Millennium - 

The Challenges of Restructuring and Change. 

London, 1 & 2 September 1994 

Quality gift available for paid bookings received by 7 July 1994 

The conference will focus on the challenges facing the industry in the next century, how 
it is restructuring for the future to achieve growth, together with the impact of 
government policy. 

Speakers taking part include:- 

Professor Herman De Croo 

Comitg des Sages 


Mr Dick Evans CBE 

British Aerospace pic 


Mr Robert J Ayling 

British Airways Pic 

Sir John Egan 

BAA pic 

Mr Hans Mirka 

American Airlines 


Mr Brian H Rowe 

GE Aircraft Engines 

Mr Juan A Saez 

Iberia, Lfneas A6reas de Esparia, SA 

Mr Charles Masefield 

Airbus Industrie 


Supported by the SOCIETY OF BRITISH AEROSPACE COMPANIES 


WORLD AEROSPACE AND 

AIRTRANSPORT Tfel: 081-673 9000 Fax: 081-973 1335 


□ Please send me conference details 
O Please send me details about marketing 
opportunities 


Name Mr/Mra/Ms/Other 
Poshaon 


Cwapany/Orga n i a a t i o n 
Address — , 


_Dept. 


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FINANCIAL TIMES 
CONFERENCES 


PostCodcL. 
Tel 


Tk 


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_Countzy. 
Fax 


Type of Business 


'HA 


MERCANTILE & GENERAL 


REINSURANCE 


ANNUAL RESULTS 
CORRECTION 

The advertisement announcing our results in Friday’s 
edition was erroneous. It should have read: 

‘The Mercantile & General Group in the last year 
achieved its best ever profit - £104 million before tax, 
compared to a loss of 445 million before tax in 1992.' 

• '1993 profit on General business £.6 million. A 
significant turnaround on 1992 loss of £144 million.' 



Appear in the Financial Times 
on Tuesdays, Fridays and Saturdays. 
For further information or to advertise 
in this section please contact 
Karl Loynton on 071 873 4780 or 
Melanie Miles on 071 873 3308 


FINANCIAL TIMES 

nnoers business newstafe* 


] 


LEGAL NOTICES 


NOTICE OF APPLICATION 

Fur the Appointment ef 
i and West Hampshire Water Fie 
as i Wafer Undertaker pursuant to 
Section 8C2) of the Water tahstry Act 1991 

Bournemouth & West Hampshire 

MU 

(Rrtfncrtd la Btffrad Nc. tROU) 

WATER INDUSTRY ACT 1991 

Tha Notice b iaroed in acnmfane* with Section 82Vbl of the Wner IndoBty Ad I99L AppUottoo bas 
fees suds to the Dneftv Gesenl of Win Senfaet by Buuraemndi Mi Wen K rngn tat Was He 
r*c New Appointee-) pnu n Scans B of the Wafer laduuy AH 19911m n a 
repisdug Boomouth wner He rBntncaoatO Bd Wen HsqabK Water He (*Wen 1 . 

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ueTMifeBbfeu nw aadeiuker* JELllaaie" The application for the Now Appointee 1 * 
ippoinlnun bpsrt of i Bomber of proponb agreed by the Boards of both tfewnsnonb and Wen 
Hampshire aad saaonaced - a Orator to tk ibwekokfcn and debealare UockinUert of Mb 
— ' is da 5* ApA 1994 a • farther «!» m ibe stegralkB of ihe two cwnpsaka enimged In 



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icMMcd icdmdaa. Tbt naaget of the ttarincBCi tf B o umwl h sad Wow Hooyfaf wj inwJve 
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fahipieoT Mb P o M nn wlh Uten Hrmprhhe, fadbg the iwnpaenf retpeettw sSenane 
noAa, in be New ApenkHee by m of nafa idoa is acavdnaoe wfcb Scficdato 2 n ibe Wner 
bdaniy Ad W9I. rtewsfa Kh ctn e a «e tuOJcd kr die approval of ibe Dbumr Gaud of Water 
Snvaxs. Start! the Dfcecn Ocnctil decide » make da war appofem. it aad Ac Cnmfar ekm it 
approved, adB mac kto Cnee oa Ac ana * 7 . 

A fnnhei Circular bas bees posted nabr 10 tbs dircbatdcro ud dvbntnn fleekMdn of barb 
Idefefllrfr 


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Aay caqablei retadog B> ibe Mrra appHMfaa aqi be Bade, daring aamal wntBg born to: 
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Bnmw— Bb. Doart BHI1 WO 
Tt± 020299111] 


RISK AND REWARD 

Congress to call 
for wide extension 
of regulation 



If the US 
Congress 
needed another 
excuse to inter- 
fere in the 
derivatives 
business, then 
it will get it 
next week. The 
General 
Accounting Office is due to add 
Its own report to the growing 
mound of reviews of the deriv- 
atives markets ami it will be 
the most damning yet 

The GAO - Congress's inves- 
tigative arm - seems set to call 
for a sweeping extension or 
regulation. Companies using 
derivatives and unregulated 
dealers involved in the mar- 
kets should be brought under 
the remit of the Securities and 
Exchange Commission, accord- 
ing to a draft of the report 
shown to some interest groups 
in the financial industry. 

Its tone is “unremittingly 
negative," said one person who 
has seen it. The industry has 
been bracing itself for some 
time for an adverse report but 
may be surprised by its stri- 
dency. 

If US legislators wanted to 
interfere in the derivatives 
industry, they have been given 
plenty of ammunition in recent 
months. Trading losses by 
some banks and hedge funds, 
and the recent revelation that 
some big companies have 
takan hits on instruments sup- 
posedly bought for hedging, 
are taken by critics as a clear 
sign that the financial system 
is going off the rails. 

The industry, and some pol- 
icy makers, are against hasty 
legislation. On Friday, Mr Alan 
Greenspan, rbairmap of the 
Federal Reserve, said risk man- 
agement systems for deriva- 
tives have stood up “reason- 
ably well" during this year's 
upheaval in financial markets. 
More evidence is needed before 
any conclusions can be drawn 
about bow well the damage- 
control systems coped with the 
market turmoil, he said. 

Meanwhile, there is already 
considerable momentum for a 
quick response. The House 
Banking Committee, for one, 
seems close to publishing a 


compromise bill that will 
impose tighter controls on the 
derivatives activities of banks. 

The committee is hoping to 
codify guidelines already being 
worked on by the Office of the 
Comptroller of the Currency, 
which oversees federally char- 
tered banks in the US. The 
agency stepped up its own 
assault at the end of May, 
when Comptroller of the Cur- 
rency Eugene Ludwig said he 
was considering imposing lim- 
its on the risks banks could 
take on through their propri- 
etary trading activities. 

The GAO report seems set to 
provoke legislators whose 
remit extends beyond the 
banking industry into action. 
“It's an invitation to DingeU 
and Markey to get involved." 
says one industry figure - a 
reference to the House Energy 
and Commerce Committee 
chaired by John DingeU and its 
sub-committee on telecommu- 
nications and finance chaired 
by Edward Markey. 

It was Mr Markey who 
prompted the GAO review, in 
June 1992. Now. he is set to 
mark its publication with hear- 
ings which could prompt a leg- 
islative initiative from his com- 
mittee. Tomorrow. the 
sub-committee will take evi- 
dence from Dennis Weather- 
stone, chairman of J. P. Mor- 
gan, and two former top 
regulators - Gerald Corrigan 
and Richard Breeden, former 
heads of the New York Fed and 
the SEC respectively. 

The sound of Washington's 
wheels grinding into motion 
does not mean legislation is 
imminent Even if the House 
Banking Committee gets a bill 
out in the coming weeks, there 
is no t elling whether or not it 
will get to the floor of the 
House. Also, Mr Markey and 
Mr DingeU have yet to show 
their hand, not to mention the 
Senate Banking Committee. 

However, the pressure is cer- 
tainly mounting on the deriva- 
tives industry to make a better 
case for its activities, and to 
come op with new disclosure 
and other initiatives of its own 
to meet the concerns. 

Richard Waters 









ma 


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COMFAGNB DE SAJQVT COBAIN 
FoHJe Qnpu; *Ue6 ■ capkal nf 
FF7JHL664J00.. 

Reglaered Office :-Le*Mkota- IS, Avemr 
IT MM - 92400 COLIRBEVOffi 
RXLS. NANTERRE B 542 «D9 332 
PARTICIPATING STOCK APRIL 1984 OF 
6CU 1. WO EACH 

As tho general Meeting provided os April 28 
199* (or Ac parridfutlng aoct own of eon 
1.000 I used In April 1984 by SAINT 
OO BA IN. cosld doc deliberate, "■"'■r tbc 
qaoreni. ibe paitldpaUsg Mock nvaen ore 
igaia convened by Ur baud of dnaon is 
Ecoml Meeting u a( Mir 16. 1994, ■ 12J5, 
U the resiucrcd office Id COURBEVOIE 
192400) w Ux Minun* 18, Avenue d’Afeace. 
This Dueling will enact oi Ihe following 


- BoMd ef Dndon? Report oadw Ceu^ny^ 
Op c o front hr furocal year 199], 

- Audi lor 1 report 00 fiaanciu] jw 199] 
recount, and element! far fixing tbc 
putnpatang «dc* yield. 

- Fixing ibe income of the huh entitled 


w dm paragraph 14 *Notice w 
Holdcra* of morns proapecitn oa 
partkxpaban tecaitaea in ECU dti*d 5 April 
1984. 

• " ■ * — r 'tin 

To xtuod ibe meeting the r—H[rt1ng Mock 
owner wll have 10 proritk a blocking rfDdarb 
famd by ibe irnMee Bid in enter 10 mpon a 
depity el ibe ntenthg they wU have 10 add a 

proxy 10 Han affidavit. 

The depoait effected aad Ihe pm apd far [be 
of the April 28, 1994, Mill available fac 
By aicmtwrt weetltg. 



«mn Be ami m ptifla B Be ML ag 

CMMAiM Ber ne tvrxmxi tor ate 

t* tact ofcm timam n He Pootitg 

— — Kota eta* Bum 

pen ntrsaid ej team 

title Bare ti we imtcrarc* 

fa fci aaaaaet at waMt 

■trough aw pool tlw ttkdaai at pern pncoa 

ti a Nnr coatpro praam re woduet at Macn o 


tid* X ecu rdti tf ,. am to tm , . .. 

iwfeoa andiw cenecaon. no re n ame ihaUki be 

Ptieen tpwi pap i tioed part purer tir an, aw tmop 

sa fa a Cmt pod peem » m ta FbM pael 

prou — f BsUBUtwmita Pot< 3tm« Pitta 

BUPBrslbr aiL e ea dmaBCiasraa 

pool BtiPng aiauenee! p ■ »tmM upon ata 

S atwat hBBP B of Pom Pxnmr Pna Furoer 

BSxtnBpnon pool petal ■ tanlSat pn BMMIpf we 

MBt hap 


S'Upw ltai^> a FflPtiy 



International Finance 
Corporation 
Washington. D.C. 

Italian Lire 200,000,000,000 
Floating rate notes 1998 

Notice is hereby given that for 
the interest period 9 May 1994 m 
SAupistEKH the notes will cany 
an interest rate of 7.68438% per 
annum. Interest payable on 
9 August 1994 will amount to 
ITL98,l89perlTL5.00Q,000 
noteandlTL 981.893 per 
m 50,000,000 note. 

Agent: Morgan Guaranty 
Trust Company 

JPMorgan 














FINANCIAL TIMfiS MONDAY MAY 9 1994 



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**>•» V V. 


■v 


FINANCIAL TIMES MONDAY MAY 9 1994 


The economy: Why 
projects stay 
grounded....Page II 




FINANCIAL TIMES SURVEY 

BANGLADESH 

Monday May 9 1994 


Foreign investment Only 
a trickle despite 
incentives....Page IV 



if 


.VS-. 


,.r 







-t 




Dhafca: Institutions < 



i ana new; tfw mid tfie c I b b b lacks capital, sfcfls and exparianee 


: A.K.U. Uahah 


F or Bangladesh the 
straggle to capitalise 
on the gains it has 
made in the past three 
years of good harvests, demo- 
cratic government and freedom 
from natural disast ers is prov- 
inghsrd. 

Mrs Khaleda Zia’s assump- 
tion of power as p rimp minis- 
ter in 1990, following the over- 
throw of the military dictator, 
General Hossain Ershad, has 
enabled the country to enjoy 
its longest period of political 
stability since its formation in 
a bloody independence war in 
1971. 

Although they remain 
among the poorest people on 
earth. Bangladeshis are 
slightly better off than they 
were, tTinnkc to bumper rice 
crops. The government has 
brought its borrowing under 
control, taken some steps to 
liberalise the economy and is 
considering implementing 
many more. 

There is a risk, however, 
that the gams co uld be lost. 
The neat general election, due 
by early 1996, is already exert- 
ing a baleful influence on the 
country’s politics, diverting 
attention from gonial and eco- 
nomic needs. Economic 
reforms are p mgragging at a 
snail’s pace while politicians 
focus on party wort 
Charges of election-rigging 
pollute the political air. Strikes 
and demonst ra tions have dis- 
rupted business. Islamic funda- 
mentalists, n um e rically weak 
but nonetheless active, have 
laiTTiohad bad-tempered attacks 
on Hip Influence of foreign aid 
organisations. 

There is still time for Mrs 
7.ia l widow of the assassinated 
soldier-president Wa ur Rah- 
man, to bring the political dis- 
putes under control and put 
the Economy and fi ghting pov- 
erty back at the top of her 
agenda. But the window of 
opportunity is dosing East 
As Mr Jamal Uddin Ahmad, 
a former deputy prime minis- 
ter turned businessman, says: 
“The political parties are fight- 
ing so much that we are head- 
ing towards a point of no 
r etur n." 

The tensions were high- 
lighted last mon th by tha deci- 
sion of the Awami League, the 
main opposition party, to nan a 


There is not much time for Mrs Zia to curb political 
disputes and put the economy and poverty back at 
the top of her agenda. Stefan Wagstyl reports 

A narrow window 
of opportunity 


strike on the day when the 
prime minister was laying the 
foundation stone for a $70Qm 
bridge - the biggest investment 
ever made in Bangladesh. A 
day which was meant to cele- 
brate the nation's economic 
progress became an occasion 
for political squabbling. 

Mrs Zia denies there is any 
risk of instability. She says: 
“The important thing is democ- 
racy »nd the democratic sys- 
tem. If democracy continues, 
then stability will continue 



" — * -»-« Dnlin.m. 

rmfurCS nmiTkSTra oulur KtMoTOIrC 

■Never in (he past has our 
economi c pos i tio n been so good* 

.and our economic policies will 
also stay in place.” 

Rangfadftch is a young coun- 
try of 120m people with a 
young country’s sense of inse- 
curity. It Is tragically vulnera- 
ble to the elemen ts, as the 
devastating cyclone of 1991 and 
the storms which lashed the 
eastern coast this month. It 
feels nervous about its huge 
neighbour. Indie 
Bangladesh's institutions 

and elites are new; the middl e. 
rings is cmaTl and larks rapitel 
skills end experience. 

Among the poor, one child in 
10 dies in infancy. Nearly one 


third of youngsters do not go 
to school. About 20 per cent of 
famines have no arrrgq to safe 
drinking water. Without for- 
eign aid, of which more than 
$2bn is pledged every year, 
Bangladesh would even have 
difficulty feeding itself. 
Although population growth 
has slowed to 22 per cent a 
year, it is still so high that in 
just over 20 years Bangladesh 
will have 200m people. 

Moreover, the country is not 
free of external difficulties. It 
is engaged in a festering dis- 
pute with India over sharing 
the waters of the Ganges river; 
and it has run into interna- 
tional rri H rlsm of its handling 

of tribal refugees from Myan- 
mar and of a long-running 
insurgency among tribal 
Chakma people in southern 

Ranglaripgh 

Mrs Zia deserves some credit 
for trying to tackle the coun- 
try’s basic economic difficul- 
ties. The government hn« con- 
tributed by expanding 
poverty-alleviation and social 
welfare programmes and 
introducing a World Bank-en- 
dorsed eennnimin liberalisation 
programme. 

Government over-spending 
and inflation have been 
curbed. Prices are rising at less 
than 2 per rent annually. Con- 
trols on foreign trade and 
investment, including high 
import tariffs, have been cut, 
internal price controls relaxed 

and a Start made on financial 
reforms and on overhauling 
debt-laden public sector indus- 
tries and services. Last 
autumn, the taka was liberal- 
ised on the cm l ent account. 

Liberalisation has particu- 
larly benefited agriculture. 
Bangladesh has become almost 


self-sufficient in food grains 
and has started exporting mod- 
est amounts of high-quality 
rice. With the country’s subsis- 
tence seemingly assured, agri- 
cultural planners are now 
looking to expand output fur- 
ther by encouraging crop speci- 
alisation. 

Foreign trade has gained 
from liberalisation and the 
establishment of two duty-free 
export-processing zones. 
Boosted by the rapid expansion 
of the garments industry, over- 



Prtme minister Khaleda Zta: 
f The Important thing fa democr ac y 
and the democratic system' 

all exports are growing at 
about 20 per cent a year and 
could reach $2.6bn in the year 
ending June 1994, according to 
government estimates. 

With the help of a further 
$lbn of remittances from Bang- 
ladeshis working overseas, 

Ranglndpgh hag nrrmwnlnteH 

foreign exchange reserves of 
$2.6bn. enough to pay for seven 
months 1 imports. 

The fieeai defirit is also well 
under control and inflation is 
low, running at an annual rate 
of 2 per cent 

AS Mr Saifur Rahman, the 

finance minister, says: “Never 


in the past has our economic 
position been so good.” 

And yet. even though Mr 
Rahman's boast is true, Ban- 
gladesh still has far to go 
before it can satisfy even the 
baric needs of its people. The 
main problem is that economic 
growth - running at 4-5 per 
cent in recent years -is too 
slow to generate adequate 
resources for the future. 

However, in order to reach 

growth rates of more than 6 
per cent, which the govern- 
ment believes is the minimum 
required, Bangladesh needs to 
make radical economic 
changes, particularly to boost 
investment above its current 
level of about 13 per cent of 
output The World Bank esti- 
mates a ratio of 18-20 per cent 
is necessary to lift Bangladesh 
into a higher level of economic 
activity. The immediate chal- 
lenge is to raise public invest- 
ment Bangladesh has S5bn of 
unused foreign aid in the pipe- 
line waiting for the govern- 
ment to implement projects to 
which the foods are tied 

The start of construction on 
the Jamuna River bridge will 
help utilise money, so will 
work on the Flood Action Plan, 
a system of embankments 
designed to protect Bangladesh 
against floods. Preparations 
and pilot studies for a World 
Bank-sponsored programme 
have themselves cost SISOm. 
There are also ambitious pro- 
jects to improve the exploita- 
tion of Bangladesh's abundant 
natural gas reserves. 

Inexperience inefficiency 
among ministers and civil ser- 
vants alike combine to frus- 
trate schemes, sometimes for 
years. The fear of corruption, 
coupled to the measures taken 
to prevent it, ties the govern- 
ment into knots. Mr Rahman 
has promised to speed decision- 
making, but aid donors see lit- 
tle sign of improvement. 

Without more public invest- 
ment, private investment will 
be slow in coming and limited 
to small projects. Industry 
needs more support than Ban- 
gladesh provides - electricity 
generation is just 80 kilowatt 
hours a head a year, compared 
with 200-350 in India, Sri Lanka 
and Pakistan. There are just 
two telephones for every 1,000 
Continued on Page 2 


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- 


FINANCIAL TIMES MONDAY MAY 9 1994 


BANGLADESH II 





ndWWEAICM.MaMi 


Bangladesh Is crying out lor Investment Without tester growth, Jt cannot hope to meet the mods of Its swefflng population 

Stefan Wagstyl on the country’s most important economic failing 


Why projects stay grounded 


Last month, Mrs Khaleda Zia, 
the prime minister, visited the 
bleak cmrihanks of the river 
jamuna in central Bangladesh 
to lay the form elation stone of 
the country's biggest-ever 
investment - a STOOm bridge. 

The bridge is sorely needed 
to link north-west Bangladesh, 
with the rest of the country. 
Today, lorries must queue all 
day to cross the river by a 
three-hour ferry ride. Mon- 
soons, floods and droughts dis- 
turb the traffic, as does the 
constant shifting of the sands 
in the Jamuna's shallow bed. 

Bangladesh is crying out for 
investment From the Jamuna 
bridge to automatic spindles in 
the textiles factories and tilling 
machines on the farms, the 
country needs capital to help 
promote economic growth. 
Without faster growth, it can- 
not hope to meet the needs of 
its swelling population. 

The government and devel- 
opment organisations monitor- 
ing Bangladesh, led by the 
World Bank, regard the lack of 
investment as the country’s 
most important economic fefl- 
ing. 

Moreover, at least as far as 
public investment is con- 
cerned, the problem is not a 
shortage of fUnds. It is a lack 
of experienced and well-moti- 
vated politicians and bureau- 
crats able to implement the 


projects on the country's 

books. 

For private investors politi- 
cal uncertainty, bureaucratic 
foot-dragging and the poverty 
of potential consumers all hold 
back business activities. Local 
investors have been as slow to 
commit themselves as foreign- 
ers. However, there are signs 
that a few large private pro- 
jects now under consideration 
could come to fruition and per- 
haps stimulate the drawing up 
of other proposals. 

Thanks to the *M1I of Mrs 
Tin 's government in bringing 


Controversy surrounding 
the $51 Om Kamaphuli 
fertiliser plant has cast 
a shadow over 
large-scale investments 


public borrowing well under 
control and curbing inflation 
to about 2 per cent, a year, 
there is plenty of scope for the 
government to ex pand the pub- 
lic investment programme. 
World Bank officials believe 
that, Car from crowding out pri- 
vate investment, an increased 
flow of public investment 
would stimulate private activ- 
ity. The Jamuna bridge is a 
good example - it will permit 
formers in the rural north west 
to bring more of their crops for 


sale in central Bangladesh, 
including Dhaka, while also 
giving Dhaka-based manufac- 
turers better access to distant 
mar kets, 

Mr Zaifur Rahman, the 

flTianna minister , is wurnmitted 

to increasing the ratio of 
investment to economic output 
to an estimated 145 per cent in 
the year to June 1994 from 13 
per cant in 1992-93. The even- 
tual target is 18-20 per cent 

Foreign aid donors would be 
ready to increase the «mnwnt 
of aid pledged to Bangladesh 
above the $2.lbn promised for 
199485, which is roughly the 
same as in the past two years. 
However, with $5bn in unspent 
funds in the pipeline, there is 
no reason to raise contribu- 
tions. 

One western diplomat 
involved in aid projects blames 
“a weak government low qual- 
ity ministers and civil ser- 
vants” for the delays in public 
investment Among the serious 
losses Bangladesh suffered in 
its 1971 independence war was 
the flight to Pakistan of many 
senior administrators who 
were of west Pakistani origin. 
Nor did the new country's 
espousal of socialist economic 
policies enable civil servants to 
acquire experience of running 
open economies. 

Mr Rahman says improved 
monitoring of schemes will 


accelerate the investment flow, 
but Hf pimnatff of donor coun- 
tries say they see tittle change 
as yet 

The con t roversy surrounding 
the ysiftm TTamapftnii fertiliser 
plant a joint venture between 
the government foreign aid 
donors and Japanese compa- 
nies, has also cast a shadow 
over large-scale investments. 
First conceived in 1980 and 
mining on stream later this 
year, the plant has been 
dogged by arguments about 
the wisdom of using Bangla- 
desh’s scarce gas resources for 
fertiliser production instead of 
fuel. Whatever the merits of 
the dispute, its effect has been 
to call into question the gov- 
ernment's ability to implement 
mega-projects. 

However, the donor coun- 
tries’ decision to back the 
Jamuna bridge scheme, which 
has also been imripr consider- 
ation for over 10 years, shows 
they are still wiling to take 
risks in Bangladesh. Similarly, 
they are supporting a wide- 
ranging flood action pro- 
gramme to reduce. the impact 
Of fixture floods following those 
which devastated the country 
in the late 1980s. 

By comparison, private sec- 
tor investments in Rangfadash 
are mostly small. Factories for 
garments, leather and handi- 
crafts, rarely cost over H00JXJ0. 



HgUM j 


Economy 


Ana. 


Population 
President — 
Currency 


, 147570 sq km 
. 11&5 mflton 


1901/W 


iMifln* 


. Abdw Rahman Biswas 
.Taka (Ik) 


Total GDP 1 erktm. pmwtdowjL 
Real OOP growth (%} 


9084 


9702 



42 


44 


Av. exchange rata -1992 S1=»nc 38.145, 1993 S1=Tk 39.139 1“ OOP per capita 


208 


212 


Co mp onent s of GDP (%) 
Private consumption 


Total Investment 


Pubflc consumption 
Exports 


Narrow money 


Bread money 


Aid Inflows ffm) 


Total external debt (>m) 



aa.1 

12.1 


07.7 

124 


11.8 


11.8 


as 


8.0 


14 JQ 


143 


Annual average % growth in 

Consumer price* frnkhte Income jgBsj 
Industrial production , .. 


5.1 


1.3 


7.3 


7.7 


14,8 


as 


14.1 


108 


Discount rate lend period, 

Overseas workers remittances ffertl 


as 


ao 


848 


944 


1811 


1675 


11838 


12254 


Be— rw— minus goM (end period. AiQ 
Trade 


16244 


24104 


Current account balance (tm) 


-60S 


-780 


Mwchancfl— exports (fen) 
Mrchantgad Imports Qa) 


1603 


2138 


3463 


3888 


Trade batonca On) 


-1556 


-1848 


Main treittig partners (% ahera, 1982) 


Exports 


United States 


354 


74 


74 


34 


7 2. 


34 


45 


04 


34 


04 


34 


14 


35.0 


124 


<flkMO*sr«xev Are 30 irttes Man** MnM 


Saunas It*. BA BmgWwh Bwmu or SMMoa. Mm* HtiMtaaghMt 
- i i n w iiii i t — n r 


pou mm at has cut its borrowing and curbed InlUtton. kHpoids ut growing fe#t but i 

AsipaceritageofGDP Annual perewrtage change , ' ' USSbUon: Aiyiual.H-4henj^|Mne^fNlai$ 



: 1968 90 91 82 83 64 
sdunac MMtny foRnaoca 


1866 90 '81.' 92 83 '94 


198890 91 92 93 94 85. 1999 90 81 92. ty.*- 

Rgiam aro.for taotpar anting Jim 30. 1894 «mi itos i rngovamrert kmreto” 


The returns can be spectacular 
- recent investments in the 
garments industry have seen 
entrepreneurs recover their 
money in a year. 

Mr Jamal Uddin Ahmad, a 
former deputy prime minis ter 
turned business consultant, 
says: "Bangladesh generates 
these small high risk, high 
return investments. But what 
we need is to create a more 
stable environment to encour- 
age more long-term local 
investment mid eventually for- 


eign investment as wefl.” 

A handf ul of larger invest- 
ments are in the pipeline. Too- 
tal, the British subsidiary of 
Coats ViyeHa, which operates a 
spinning mill in Bangladesh, is 
building a $25m extension to 
increase capacity threefold. 
Bangladesh Tobacco, an affili- 
ate of BAT Industries of the 
UK, is considering a $60m plan 
for modernising tobacco and 
cigarette production. 

In the longer term, foreign 
companies are interested in 


investing in telecommunica- 
tions, transport and energy, if 
these state-dominated indus- 
tries are opened up to private 
investment as the government 
plana. Tn oil and gas, Holland 
Sea Search of the Netherlands 
and Cairns Energy of the UK 
are the first of seven interna- 
tional on exploration groups to 
have completed exploration 
and production agreements. 
Other potential investors 
include Occidental Oil of the 
US and France's TotaL 


hi electricity, Internationa! 
Energy Group of the US and 
BP Goenka group, an Indian 
business group, have proposed 
pi*Tw for building and operat- 
ing privately-owned power sta- 
tions - but detailed rules for 
the entry of private companies 
have not yet been established. 
The government hopes to can- 
plete a new energy policy, 
including rules for private sec- 
tor participation, next month. 


Stefan Wagstyl 



ZAKARIA GROUP 


ZAKARIA ENTERPRISES LTD: Sole agent of world famous 
'Juki Brand 1 industrial sewing machine, Kansai special, Naomoto 
steam boiler A iron and Kashtma fusing machine. 


PRESIDENT APPARELS LTD: Manufacturer and exporter of 
high quality shirts and ladies blouses of all kinds having capacity 
of 120,000 dzs, a year. 


LANCIA SHIRTS LTD: Manufacturer and exporter of finest 
quality shirts, ladies blouses, jackets, jogging suits, T-shirts, polo 
shirts, pauries, etc. yearly capacity 300,000 dzs. 


APPAREL BUYING AGENCY LTD: One of the country's 
leading buying bouses representing buyers of Europe and USA. 


KENSINGTON TROUSERS LTD: Country's finest A top 
quality trouser manufacturer and exporter. 


HEAD OFFICE: J.K. Bhaban (6th Floor), 30, V.I.P. Road, 
Kakraii, Dhaka- 1000, Bangladesh. 

Phone: 832108, 832109, 404068 

Telex: 64292 L PAL HI, Fax: 880-2-834783 


DHAKA STOCK EXCHANGE 


Enter the foreign investor 


The sight of foreign capital 
has stirred the sleepy Dhaka 
Stock Exchange into action. 

An estimated $50m has 
flowed into Bangladeshi 
shares since the end of last 
year, borne by the tide of 
money washing through 
emerging markets over the 
past 12 months. It am o un ts to 
a few drops of capital com- 
pared with the buckets poured 
into India and China, bat for 
Bangladesh any sign of foreign 
investment interest is wel- 
come. After rising a mere 6 
per cent last year, the Dhaka 
SE Index has doubled in 1994. 

“This is the first time for- 
eign investors are investing in 
Bangladesh,” says Mr Kurshid 


Alam, the DSE chairman. 
Fund managers who have vis- 
ited Dhaka indude executives 
from the Hong Kong-based 
Regent financial services 
group, which manages the 
Regent Pacific Moghul Fond, 
which invests in southern 
Asia, from Jardine Fleming of 
Hong Kong and Fidelity of toe 
US. Stockbrokers from Smith 
New Court of the UK and WJ. 
Carr, an affiliate of France's 
Banque Indo-Suez, have also 
called on Mr Alam and lus coT 




EXIMCO's beginnings can be 
|fclo 1 966, 27 years ago. when 
' Dacca industries commenced 
tiOn and export of high quality jute 
yam. Since then, the BEXIMCO companies 
have consistently progressed and expanded 
operating in a diverse range of industrial 
sectors - pharmaceuticals, textiles and 
marine foods, to name only the major ones. 
BEXlMCO aims at selecting new activities 
carefully, where maximum advantage can be 
taken of its own extensive accumulated 
business experience as well as the 
competitive advantages provided by 
Bangladesh's economic structure. 


- The Progress Continues 


i tij 

EXImCO brings the synergy of 
t well structured organization to 
itures it undertakes. Currently 
-strang Bcrimco team spread 
over its 1 9 companies are composed of 
enthusiastic youthful and highly 
motivated professionals. 



[renumbers tell the remarkable story, 
fring the period 1 989-93, the turnover 
1 only 41% to Tk. 2,853m in 1993, as 
jp moved away from trading and into 
rang. However, during this 5 year 
period profit registered a compounded annual 
increase of 1 38% and in 1 993 stands a 
Tk. 219 m. Total Assets rose from Tk. 1,309m 
in 1989 to Tk. 4,828m in 1993 and Net Worth 
from Tk 1 86m to Tk 1 ,204m. Financial 
participation by international DR's like ADB, 
CDC , DEG , FMO and 62,000 investors is yet 
another testimony to B EXIMCO's strong 
business goodwill. Total market capitalization 
at present of 6 BEXImCO companies listed with 
D5E is Tk 3,794.15m which is 157% of the 
total stock market capitalization. 


ffeaive management, prudent application 
rial resources and a commitment to 
very high work standards underpin the 
BEXlMCO vision for future growth. 


3EX1MGQ 

Committed to the Economic Development of the Nation 
Corporate Headquarters 

17 Dhanmondi R/A, Road No. 2, Dhaka-1205, Bangladesh 
Phone* : 061891-5. 5001 S 1 -5, Telex : 675340 BXIM Hf, Fax : 880-2-363470 


Foreigners now own an esti- 
mated 5 per cent of Bangla- 
deshi stocks which have a 
combined capitalisation of 
about Slbn. There are no ceil- 
ings on foreign ownership of 
the 142 listed companies. But 
stock can be difficult to 
acquire because an estimated 
50 per cent of shares are 
owned by founding: entrepre- 
neurs and their families and a 


farther 40 pa* cent locked in 
long-term holdings with gov- 
ernment financial institutions. 
Mr finttyaz Hussain, a broker 
and investment adviser, says 
this leaves only about 10 per 
cent of stock floating free. “Of 
course, this tends to drive up 
prices." 

Foreign buyers have concen- 
trated on about 15 leading 
shares whose prices have 
climbed 300 per cent and 
more. For example, Beximco, a 
diversified trading company, 
was quoted last month at 
Tk80, more than four times 
higher than its low of last year 
of TU8. Bangladesh Tobacco, 
the affiliate of Britain’s BAT 
Industries traded last month 
at Tk230, up from last year’s 
low of TWO. 

The trading room is a dark 
hall in which tables covered 
with white tablecloths are set 
out in a circle. The stockbro- 
kers sit at the tables, with 



Trades are settled in five days. There is no forw a rd or futures market 


PiCbWAXMMgM 


microphones in front. Trading 
is carried out in bursts of fran- 
tic shouting Into the micro- 
phones. Officials record the 
prices in chalk on a large 


one 


blackboard occupying 
whole wall of the room. 

Trades are settled in five 
days. There Is no forward or 
futures market The market Is 


supervised by a Securities 
Commission, founded only last 


Stefan Wagstyl 


Window of opportunity 


Continued from Page 1 
people when even India has 
seven. 

Only this year will the last 
ferry crossing on the road from 
Bangladesh to the second city 
of Chittagong be replaced by a 
bridge. 

One reason why public 
investment is slow is that the 
government’s tim e and money 
Is hong swallowed tip by the 
loss-making, over-manned, 
state-owned industry. The 
gross losses in 1992-93 
amounted to about 20bn taka, 
the equivalent of 45 per cent of 
external aid disbursements. 
Moreover, the inefficiency of 
these Industries acts as a drag 
on the rest of the economy, 
raising costs and dissuading 
companies from investing. 

Prodded by the World Bank, 
the government haa committed 
Itself to streamlining enter- 
prises, liberalising the state- 
dominated ftpnnrtai markets, 
privatising and opening basic 
services such as electricity 
generation and telecomzmmica- 
tions to private investment 

It has already embarked on 
rationalising the jute industry, 
the biggest loss-maker, with 
the help of a $250m World 
Bank loan which will contrib- 


ute towards compensation for 
some 20,000 mill workers losing 
their jobs. 

Financial sector reform 
depends crucially on improv- 
ing the performance of the 
state-owned banks which hold 
about 80 per emit of hanking 
assets. The government is 
planning to privatise Rupali 
Bank, a medium-sized state- 
owned Institution, later this 
year. It has also granted per- 
mission for Citibank of the US 
to join the small group of for- 
eign banks operating In Ban- 
gladesh and increase competi- 
tion. 

But deep-rooted problems 
remain, notably the $2bn of 
bad debt weighing on the pub- 
lic sector banks - about a third 
of their assets and much of It 
accumulated through loans to 
state-run enterprises, notably 
jute. 

Overall progress with priva- 
tisation is painfully slow. Only 
two of about 40 enterprises 
identified for stock market flo- 
tations have actually been 
sold. Measures to attract pri- 
vate investment into infra- 
structure are only beginning to 
be implemented. The govern- 
ment was due to sign its first 
contract for oil and gas explo- 


ration with a foreign consor- 
tium this month. 

The latest indications are 
that the government is more 
likely to slow economic reform 
than to accelerate in advance 
of the next general election. 
The ruling Bangladesh 
National Party was defeated In 
municipal elections in Dhaka 
and other cities In March -a 
setback which Mrs Zia says 
was partly due to the unpopu- 
larity of reform. 

The obstacles to further 
progress are many, politicians 
who are more interested in 
fighting over the existing polit- 
ical and economic turf than 
increasing future acreage; civil 
servants worried that liberalis- 
ation will curb their powers, 
including access to bribes; 
strike-prone trade unions 
which resent the job cuts that 
serious public sector reform 
would bring; Islamic funda- 
mentalists seeking to exploit 
deep-rooted suspicions of pro- 
grammes advanced by foreign 
donors; and poverty and igno- 
rance. 

But amid the gloom there is 
also hope. Bangladesh's fight 
against poverty has spawned 
two of the world’s most suc- 
cessful non-profit organisa- 


tions - Grameen Bank, a co-op- 
erative bank which has won 
endorsement from President 
Bill Clinton for its work with 
the poor, and the Bangladesh 
Rural Action Committee 
(BRAQ, which has a range of 
programmes including credit 
co-operatives, chicken Canning, 


schools, and health centres. 

These institutions show bow 
even the very poor can take 
advantage of opportunities, 
given the right encouragement. 
As Mr Mohammed Yunus, Gra- 
meen Bank's founder, says: 
"Poverty is a very powerful 
motive for action." 


Visit Bangladesh 
before tourists come 

Stay at PARJATAN facifities in Dhaka, 
Chittagong, Cox’s Bazar, Rangamati, 
R^jshahi, Bogra, Rangpur nad Sylhet 
Air-conditioned accommodation, excellent 
food, rent-a-car service and recreation 
faeffities. 

For detafls please contact BPC Tourist 
Information Centres at : 

2a Irtemational Airport Phone : 894416 


Dhaka Sheraton Hotel 
BPC Head Office. 


tr 


Phone ; 509479, 863391 
Phone : 817855-9. 317838 
Telex : 642206 TOUR BJ 
Fax ; 880-2-817235 


BANGLADESH PARJATAN CORPORATION 
Nacnai lixrem Organ iz ation 



9 


• » •< 




’ i - . 


ftment 






*Ml s 


FINANCIAL. TIMES MONDAY MAY 9 1994 







••t tout growth 




A? 





Sfof.w W:: 




i 


L ' 



Sheila Jones examines a water dispute between India and Bangladesh 

When the Ganges runs dry 


India's Farakka dam nw« year 
celebrates its 20th anniversary, 
bnt a water-sharing dispute 
with Bangladesh that goes 
back even further is far from 
settlement while term of mil. 
linns gO hungr y, 

The dam, 11 miles inside 
India’s eastern border with 
Ba ngl adesh, slows the Ganges 
as it turns south towards the 
Bay of Bengal 

India bunt the dam to flush 
out sflt from the port of Cal- 
cutta. Millions of tonnes of 
water are diverted dafly from 
the Ganges into India’s Hoogh- 
ley river and south to the 
coast 

But the diversion has dried 
out the south-western edge of 
Bangladesh, where the ramg pg 
and Its tributaries feed the 
region’s agricultural land. 

Last year, for the first time 
since the dam was built in 
1974, there was too little water 
to power irrigation pumps at 
the mouth of the Gorai river, 
the Ganges’ main tributary in 
Ban gladesh. The pumps have 
been idle again daring this 
yeSJr’s dry season. The Ganges- 
Kofedak irrigation project, the 
country’s largest and until now 
its most successful, has ground 
to a hal* 

Most of the south-west 
region's loskm of main irriga- 
tion canals are dry. Where 
there is w a ter, it is stagnant 
Last year, Bangladesh received 
barely a third of the Ganges 
flow. Farmers say they lost a 
third of their rice crops last 
year, at a cost of Tklbn. The 
sail was too hard for planting 
the dry season crop. They 
expect this year’s harvest to be 
little better. 

There is hardly a current at 
Hardinge Bridge, 15 miles 
inside Bangladesh, where the 
Gorai leaves the Ganges. Fur- 
ther downstream, there is no 
flow at all, only sandbanks and 
stagnant pools. The Gorai has 
dried up. 

At Kushtia, 25 miles down- 
stream of the Gorai pump 
house, a few scruffy boys kick 
a football across the river bed. 
The Gorai ferry stands idle as 


trucks ease their way down the 
river banks onto rutted tracks 
beading east 

Monsoon rains will replenish 
the river in a few weeks, but 
even now, in the dry season, it 
should flow strongly, feeding 
350,000 acres of agricultural 
land. 

The Ganges is running so 
slowly that sDl is building up 
in the Gorai mouth, where 
canrihanira stand 8-10 feet high. 
The shallower river bed means 
tha river cannot contain sea- 


Mr Mandal says the l*mHans 
- about a fifth of the region's 
50m population - are suffering 
most “There is no compensa- 
tion for their losses. Fanners 
are only just surviving. They 
simply have to eat less." 

Farmers who normally sell a 
Quarter of their crops produced 
only enough rice last year for 
their own consumption. Farm 
labourers with nothing to do in 

the dry season scramble for 
any work they can get, but 
there is on offer. 










• v — •• 


- x, -•« J9 

; . ,».r N . v ; lnc» t ~ 


I d hm ic - .v 

lo Km «• -r\ • ' 


qnnai flooding. The water spills 
over onto the i«nii l ruining thn 
soil and spoiling crops. The 
uneven flow from Farakka is 
battering the Ganges banks, 
causing it to shift and 
encroach on agricultural lami. 

Mr Abdur Rahman Mondal, 
an adviser on the G-K project, 
fears that recant advances in 
Irving standards are being lost 
hnwmai of th<» damage to 
stocks and agriculture. The 
region is going backwards, he 
says. 

*Tn years to «wia. this area 
will be a desert The termers 
will be back where they 
started, when they were very 
poor indeed. Gradually, and 
with the help of this irri gation 
programme, they have come 
up. They are better dressed. 
They havB pukka hnnms and 
food. In another few years they 
will have nothing unless the 
Ganges flow is restored.” 


Atom, 36, says he mi ght earn 
a few taka helping irrigation 
workers to shift sand from the 
river bed. Last year, he had 
enough rice in stock to main- 
tain his friffnnw and food hie 
family . But it is much harder 

tWg year. 

Mr Shaikh Abdul Momin, 
who is responsible for water 
raanagnmimt on the G-K proj- 
ect, says that only the few 
farmers rich enoug h to have 
water pumped from below 
ground have produced dry sea- 
son rice. But this cannot solve 
the problem for the whole 
region, he adds, because deple- 
tion of the water table is 
threatening supplies of drink- 
ing water and will disrupt the 

ecological halanrav 

Bangiadash has appealed to 
India over the past two decades 
for a greater share of Ganges 
water. “We have been talking 
about Farakka since the incep- 


Solution to flooding sought 


Aid donors from 15 countries gather-in Dhaka 
at the end of this year to set in motion a Rood 
Action Plan for Bangladesh, writes Sheila 
Jones. The plan follows a five-year programme 
of studies and pilot projects across the country 
into ways of preventing disastrous flooding. 

This first stage of the plan, costing (150m, 
was initiated in 1990 alto- the disastrous floods 
of 1987 and 1988. The work started only after 
initial studies of damage, flood policy and 
stru c tur al solutions carried out in 1989 by 
France, the US and Japan with the government 
of Bangladesh. 

A review of tin latest work, coordinated by 
the World Bank and funded by aid donors and 
the United Nations Development Programme, is 
doe in July. The aim is to agree on a compre- 
hensive and sustainable solution to the coun- 
try’s chronic flood problem, hi coastal areas, 
cyclones cause more damage, bnt they are 
much harder to predict and are considered vir- 
tually impossible to controL A separate study 
of cyclone-prone areas is in progress at a cost of 
about (75m. 

Pilot projects on flood mitigation are under 
way on the Brahmaputra, testing the effective- 
ness of embankments and river regulators. 
Study groups have also examined the pattern of 
flooding and regional needs, river bank pro- 
tection, the encroachment of water onto agri- 


cultural land and ways of stabilising shifting 
rivers end of securing adequate drainage. 

Bangladesh is 80 per cent floodplain. Its land 
is shot through with rivers. The largest are the 
Ganges, the Brahmaputra and the Meghna. The 
country is vulnerable to catastrophic floods 
that destroy crops, homes, livestock and the 
infrastructure, but seasonal flooding is essen- 
tial for food and life. The Flood Action Plan 
thus advocates the principle of “controlled 
flooding”. 

“The basic policy is to allow normal flooding, 
which farmers and fishermen need, but to keep 
out unwanted floods, the ones that do damage,” 
says Mr Hugh Brammer, an agricultural spe- 
cialist and adviser on the Flood Action Plan. 
River embankments would keep out unwanted 
floods, while regulators would be open at other 
times to allow for normal flooding and drain- 
age. 

Mr Brammer that public participation is 
a vital part of the project because of the need 
for local maintenance and operation, and the 
possibility of conflicting interests between, for 
example, fanners and fishermen. 

He admits that the programme is ambitions. 
“Bnt you simply cannot leave people exposed in 
this way. ft took the Netherlands 600 years to 
create a system of embankments and regula- 
tors. We don’t have that time in Ban g l adesh." 


EXPORTS 


Garments industry leads 


Monno Khan enjoys the irony of selling 
plates to Staffordshire, the home of British 
pottery. The UK was his company’s first 
overseas buyer. Today, Monno Ceramic 
Industries, Bangladesh 's biggest producer 
of porcelain tableware, sells to 51 coun- 
tries. 

Monno, like Bangladesh as a whole, is 
looking to exports for growth. 

“We should go for exports in any form, 
whether porcelain or other products, to 
give employment to our millions of peo- 
ple,” says Mr Khan, chairman and manag- 
ing director. 

Mcmno's exports have risen more than 
five-fold in the past five years. Total safes 
are expected to rise to about Tk44Qm this 
year, with exports - mainly to the Euro- 
pean Union and the US - taking an 
increasing share. 

Ce ramics represents only a tiny portion 
of the country's exports - 024 per cent last 
year - but the sector is one of a few that in 
recent years has shown dynamic growth 
and expanding overseas markets. Bangla- 
desh’s total sales abroad last year rose by 
19.5 per cent to Tk2.4bn, covering almost 
60 per cent of the country’s import bill, 
and the government is predicting a further 
18 per cent increase this year. 

Th e garments industry is the country’s 
biggest exporter and one of its best hopes 
-along with a clutch of smaller growth 
industries incl uding frozen foods, leather 
ami iw amina - for providing jobs and 
lmdprpinning pvpnrt-lad growth. The sec- 
tor has grown rapidly in the past 15 years, 
helped by economic liberalisat ion, fiscal 
incentives, low wages and a relatively dis- 
ciplined workforce. It is the country’s big- 
gest industrial employer, with about 
800,000 workers. 

T jg t year, exports of ready-made gar- 
ments rose nearly 19 per cent to Tk4&2bn 
- some 52 per cent of total exports. The US 
market accounted for 52 per cent of Bang- 
ladeshi garment exports last year, and the 


European Union 40 per cent But growth 
In recent years 1ms failed to match the 
rapid expansion of the 1980s as new play- 
ers have entered the market and the devel- 
oped world has languished in recession. 
With its principal markets recovering, the 
Bangladesh Garment Manufacturers and 
Exporters Association says its main con- 
cern now is the industry’s dependence an 
imported raw materials and fabric. Less 
than 2 per cent of fabric used in the gar- 
ments industry is produced locally. 

“Last year, we could not reach our 
growth target because of a fabric shortage 
caused by poor cotton harvests,” says Mr 
Redwan Ahmed, the association's presi- 
dent and a RaTigfadawhi National Party 
MP. “Some of our orders were cancelled 
because prices went too high. It is our 
duty to invite foreign investors or sunset 
industries in developed countries to relo- 
cate their factories here.” says Mr Ahmed. 

Fortune gnrmpjits has just moved into a 
new factory in Dhaka, where it has capac- 
ity to make 5,000 garments a day, mainly 
shirts and trousers for the US market 
Fortune says its shirts cost about SI each 
to produce. They sell wholesale at $4-$5 
and retail in the US at about $40-550. For- 
tune. like other large manufacturers, 
wants to increase valueadded work and to 
reduce its dependence cm imported fabrics. 

“We aim to be fully integrated and will 
start by weaving next year,” says Mr 
Mohammad Abu Taher, managing direc- 
tor. "Then we will go on to dyeing and 
finishing , perhaps with a foreign partner.” 

Mr Akmal Hossain, director-general of 
the Export Promotion Bureau, concedes 
that the future for garments lies in full 
integration, and says the government is 
ready to support the industry. “In gar- 
ments, backward linkage is one of the 
most important areas. It will be hard for 
us to survive in competition with others 
when import quotas are phased out under 
the new Gatt [General Agreement on Tar- 


iffs and Tradel agreement We must go for 
a whole industry.” 

The wider push for exports, drawn up 
under World Bank guidance, prompted the 
government last year to open a second 
Export Processing Zone, a duty-free area 

for companies selling 100 per cent Of their 
output abroad. The EPZs, one in Chitta- 
gong and the second in Dhaka, aim to 
draw in foreign capital* to widen the coun- 
try's economic base by fostering new and 
developing industries; and to generate 
jobs, particularly in more advanced tech- 
nological sectors. 

But the rate of arrivals has been slow 
and Bangladesh continues to lag behind 
its Asian neighbours in attracting foreign 
capital or the transfer of technology. Mach 
of Chittagong’s EFZ stands vacant, and 
only li ght industry hug moved in. 

While some foreign investors applaud 
improvements in incentives, others cam- 
plain of an overbearing bureaucracy. Only 
44 foreign companies - among them Japa- 
nese, South Korean, US and Hong Kong 
compani es - h ave set up in Chittagong 
since the EPZ opened in 1983. Of these, 13 
are joint ventures with local companies. A 
further nine are BangiadeshL Total invest- 
ment at the site is barely $l40m, providing 
about 25,000 jobs. 

If foreign investment from the developed 
world Is slow In coming, the industry’s 
best hope may be with India, says Mr 
Jamal Ahmad, a former senior minister in 
the Bangladeshi government He says it is 
easier anf i more profitable for nangbilMhi 
entrepreneurs to smuggle fabric from 
India than to invest at home because of a 
porous border and the taka’s relative 
strength against the rupee. 

India should be allowed free access to 
the Bangladeshi market, he says, encour- 
aging it to buy more from Bangladesh and 
to enter Into joint ventures. 

Sheila Jones 


Agriculture is back on its feet, writes Sheila Jones 

Bumper rice harvests 


Hon of Bangladesh fin 1971],” 
says Mr Majid ul-Haq, agricul- 
ture and water minister. 

In 1977, India guaranteed a 

minimum of 80 per cent Of the 

Ganges flow under a five-year 
treaty. There has been no for- 
mal water-sharing agreement 
giT»»A the treaty lapsed in 1993 , 
Since then, the Ganges water 
level has dropped dramatically. 

Mis Khaleda Zia, the prime 
minister, has raised the dis- 
pute with the United Nations 
in the hope that it will put 
pressure on India to release 
mare water. She has told the 
UN it is a life-and -death crisis. 

“India is a big country, arid 
it has many resources so it 
should not harass a small 
country Hke Bangladesh,” says 
Mrs flfa “We are not demand- 
ing any of their share of the 
water. We are simply demand- 
ing our rightful share.” 

Mr PV Narasimha Rao, 
India’s prime minister, told 
Mrs 2a at a summit meeting 
in 1992 that an agreement Had 
to be made for sharing “the 
flow in the Ganges on an equi- 
table basis”. Bnt since the 
summit, and despite further 
pledges from India, little has 

ha ppwwl 

India has also suggested 
broadening the discussion to 

inrliwle thp B rahmap utra and 

other river s in the region. But 
it rejects all moves by Dhaka 
to bring in outside organisa- 
tions, 25 thp UN, or other 
parties like Nepal, whose riv- 
ers feed into the Ganges. 

Bangladesh is in a weak posi- 
tion: India is lTpgt ream and it is 
a much larger country. 

The only pressure on Delhi fe ! 
the illegal movement of about 
10m Bangladeshis across the 
Tndfv - Bangifldoshi border in the 
past 20 years. They have 
moved to fry to escape poverty, 
partly -mdnnpH by the drought. 

Bangladesh dismisses India’s 
suggestion that it shnnld build 
a link canal fr o m the Ganges 
to the Br ahmap utra to increase 

water supplies. “R goes com- 
pletely against the grain of 
nature,” says Mr ul-Haq, 
adding that such a fink would 
destroy crop lend and dla placp 
th ousand s of people. 

Industry is s uffering too, he 
says, because corrosive saline 
water has crept inland from 
the south. Factories have to 
bring in fresh water, at great 
cost, for cooling and process- 
ing. 

Increased salinity is also 
threatening the regeneration of 
timber-bearing trees in the 
region’s mangrove forests. 

Thousands of people 
employed in river transport are 
without work in the dry sea- 
son. Fish stocks have been 
depleted, causing losses esti- 
mated at Tk4bn in recent 
years. 

Workers on the G-K irriga- 
tion project say health prob- 
lems will follow as washing 
declines and drinking water 
from underground is depleted. 
“The health problems will 
come gradually," says Mr R. C. 
Das, an irrigation engineer at 
Chuadanga, the southernmost 
town erf the G-K area. 

“hi the next 10 years, I am 
afraid people will die. Fifty or 
60 farmers came here last week 
demanding water. They were 
shouting for it But what can I 
tell them? I have none." 


Like a punch-drunk boxer, Bangladesh 
has reeled from the blows of flood, 
drought and cyclone. Its crops have been 
wasted out, dried up and blown away. 
About 300,000 people have died in natural 
disasters in the past seven years. 

But after a devastating cyclone in 1991, 
and despite flash floods last year, agricul- 
ture Is back on its feet, producing bumper 
rice harvests in the past three years. 

Agriculture dominates the Bangladeshi 
economy. It accounts for about 36 per cent 
of total output, employs 60 per cent of the 
labour force and determines incomes and 
consumption for the vast majority of 
Bangladeshis. Rice dominates the sector, 
accounting for about 70 per cent of 
cropped land. The rest is accounted for by 
pulses, wheat, jute, oil seeds, sugar 
plants, tea, spices, vegetables and fruit. 

Last year, achieved a long- 

sought goal of foodgratn self-sufficiency. 
Rice production has risen from 14.2m 
tonnes In 1963 to l&5m tonnes last year, 
keeping pace with the co unt ry ’ s rising 
population. A rice harvest of about 19m 
tonnes is expected this year, despite lower 
output in the south-west region. 

Mr Majid ul-Haq, agriculture and water 
minister, says the improvements have 
been achieved through research, which 
has produced high-yielding rice varieties 
as well as a greater willingness among 
farmers to ex per im ent. 

Research and development in the past 
14 years have produced a wider ase of 
high-yield rice, improved farming meth- 
ods, greater use of fertiliser and more 
widespread irrigation, mainly through 
deep tnha wells » w< i irrigation wnwh The 
amount of cultivable land under irriga- 
tion has increased markedly in the past 
few years from 17-20 per cent to about 35 
per cent Mr ul-Haq says the figure could 
rise to betwe e n 42 per cent rad 45 per 
cent if Bangladesh resolves its dispute 
with India over sharing wat e r from the 
Ganges. 


But Mr ul-Haq believes that improve- 
ments in rice yields and fertiliser use 
could reach their limits in five to six 
years, by which time, the population is 
likely to have risen to about 130m. 

“The population growth that will come 
about past the year 2000 will really pose 
some problems," he says. The higher pop- 
ulation will demand production of several 
million tonnes more foodgrain. At the 
same time, housing will encroach on agri- 
cultural land so the government will have 
to find new forms of housing. “Perhaps 
we are not rising vertically as fast as we 
should be,” says Mr ul-Haq. 



Aspicutture dominates the economy and 
amptoya 80 per cent of the labour force 

Research is under way to produce still 
higher-yielding rice seeds, and varieties 
more resistant to flooding and higher 
water salinity. The government is also 
encouraging a shift from rice to wheat, 
which requires less water than rice and 
can be grown out of the rice seasons, 
although yields drop in high tempera- 
tures. “People have taken more to wheat 
It has taken ns 30 years, but now it is 
quite Mm™**" for wheat to he served in at 
least one meal a day." 

The government is also encouraging the 
introduction of form machinery. The low 
cost of labour has discouraged invest- 


ment, says Mr ul-Haq. But the need for 
machinery has become more urgent 
because of the loss of cattle, used In till- 
ing, in recent cyclones. The government 
has started to lease form machinery to 
groups of fanners forming cooperatives 
and increasing farm sizes. 

Much of the land Is broken into tiny 
plots with farms of less than one acre 
accounting for about 40 per cent, while 
about 5 per cent of form households own 
and operate more than 25 per cent of 
agricultural land. This means that recent 
technological advances have tended to 
favour a growing number of large land- 
owners, although aid agencies say that 
even the smallest plots of land have bene- 
fited, particularly from the increased use 
of fertiliser. In addition, agricultural 
employment has increased with the use of 
high-yield rice, which is between 20 per 
cent and 50 per cent more labour-inten- 
sive than traditional varieties. 

But even today, despite improved har- 
vests and lower rice prices, millions of 
Bangladeshis are still going hungry. Some 
aid workers say the government is still 
moving too slowly to Improve form out- 
puts and that implementation of new 
technology and farming methods is ham- 
pered by bureaucracy. 

About 30m Bangladeshis cannot afford 
even 1,805 calories a day (20 per cent less 
than the wiinimnm intake reco mmend ed 
by the World Health Organisation), 
according to a recent aid agency survey. 
The report - Fork in the Path : Human 
Development Choices for Bangladesh - puts 
some of the blame on an over-concentra- 
tion on rice at the expense of more nutri- 
tional foods such as beans and pulses. 
Foodgrains production would have to be 
increased by 1.7m tonnes to feed the popu- 
lation adequately. Even then, says the 
report, the poorest families in both urban 
and rural areas would be unable to buy 
enough food: their only long-term hope 
for food-security is productive work. 


Travel: Transport links in 
Bangladesh are often slow and 
prone to disruption by bad 
weather. Allow time for delays. 

International airlines with 
flights to Dhaka in c lude Ban- 
gladesh flinmn, British Air- 
ways, Thai Internati onal, Sing- 
apore Air lines and Malaysian 
Airlines. 

Health: Travellers going out- 
side Dhaka should take anti- 
malaria tablets. Tap water is 
not safe to drink anywhere. 

Conditions -for travel and 
health are generally better in 
winter, when it is relatively 
cool and dry. 

Hotels Thou are two luxury 
hotels in Dhaka - the Sunar- 


BUSINESS GUIDE 


gaon, which belongs to the Pan 
Pacific Hotels Hiain, and the 
Dhaka Sheraton. The fax num- 
bers are 818324 and 932915 
respectively. 

In Chittagong, the best hotel 
is the Hotel Agrabad, fax num- 
ber 31-22557. 

Offices and housing: Office 
space of modest quality in cen- 
tral Dhaka ami Chittagong is 
available for 25 US cents-plus a 
square foot a month. Houses 
rented to foreigners as .homes 
cost $500-§1,500 and more a 
month. 

Currency: The taka is convert- 


ible on trade and current 
accounts. One US$ is worth 
40 JO taka. The pound trades at 
60.16 taka. 

Trade and investment: Bangla- 
desh offers same of the most 
liberal conditions for foreign 
trade and investment of any 
developing country, innhiding 
tax holidays of five to 12 years. 

The government’s Board of 
Investment offers extensive 
advice and support, including 
help with hotel and travel and 
making contacts with Bangla- 
deshi ram pan tea 

The board’s fox number in 


Dhaka is 633626. The telex 
number is: 642212 BOI BJ. 
Trade bodies: The apex organi- 
sation Is the Federation erf Ban- 
gladesh Chambers of Com- 
merce and Industry in Dhaka. 
The fox number is 863213. 

The Foreign Investors’ 
Chamber of Commerce and 
Industry, the forum for foreign 
businessmen, is also in Dhaka 
The fax number is 863688. 
Stock exchange: The Dhaka 
Stock Exnhang a is located at 
9F, Motijheel Commercial 
Area, Dhaka 1000. Telephone 
numbers 239882 and 231935. 

Compiled by Reazuddin Ahmed 
and Stefan Wagstyl 


Abu Dhabi • Kuala Lumpur • Dubai • Kuwait • Bangkok • Delhi • London 
Singapore • Kathmandu • Calcutta • Hong Kong • Athens • Paris • Tokyo 
Delhi • London • Bahrain • Bombay • Doha • Rome • Frankfurt • Bahrain 


Paris • New Ya| 
Rome • TofJPSNS 


Singapore 


^ ■; 


Jeddah • Loc 


*n • Riyadh • Kuala Lumpur • Riyadh 


Abu Dhabi • Singapore • Muscat 


Athens • Jeddah • New York 


Kong • Doha • Paris • Calcutta 


• Abu Dhabi • Hong Kong • Athens 


pKprork • Frankfurt • Rangoon • Singapore • Kathmandu • Dubai 
P5ur • Calcutta • Kathmandu • Bombay • Bangkok • Amsterdam 
London • Kuwait • Rangoon • Hong Kong • Rangoon • Frankfurt 


din • New York • Amsterdam • Bangkok • Abu Dhabi • Rome • Delhi 


Frankfurt • Bombay • Doha • Singapore • Kuala Lumpur • Paris • Jeddah. 
Kuwait • Abu Dhabi • Doha • Athens’! • 



Yes ! You can now add the Big 
Apple to the list of more than thirty 
destinations already served by Biman 
Bangladesh Airlines. With direct 
flights every Saturday from Dhaka, 
Delhi, Dubai and Amsterdam, 
Biman will take you where you want 
to go. 




ia akpv 

Biman Bangladesh airlines 





FINANCIAL. TIMES MONDAY MAY 9 1934 


iSH IV 


Only a trickle of foreign investment 


Bangladesh is attrac tin g only a trickle 
of foreign investment despite a raft of 
incentives and cheap labour, writes 
Shftha Jones. 

Total foreign investment stands at 
barely 9800m, the balk of which is In 
one single project, the $510m Kafco fer- 
tiliser plant. Tax holidays and duty- 
free facilities hi two Export Processing- 
Zones have attracted only about 9140m 
in the past 10 years. 

Many foreign businessmen say they 
are put oft by an overhearing bureau- 
cracy, poor Industrial relations, low 
productivity, and an underdeveloped 
infrastructure. They also worry about 
political stability and a lack of protec- 


C oustruction workers are 
putting the finishing 
touches to a shiny new 
fertiliser plant in Chittagong, 
south-east Bangladesh. It is all 
steel tubes, storage tanks and 
glistening metalwork -a sight 
to de light the eye of any engi- 
neer. 

Kafco is nearly ready for 
business. This $510m project is 
the biggest ever foreign invest- 
ment in Bangladesh. Compa- 
nies, aid institutions and 
export credit agencies from 
five different countries are 
involved. 

But even at this late stage, 
the plant is clogged by the con- 
troversies which have plagued 
the project from its Inception. 
Arguments rage over securing 
adequate supplies from Bangla- 
desh's natural gas fields, over 
costs and over whether the 
plant sho uld have been hunt at 
an. 

The project is on target for 
completion next month. It will 
export 500 tonnes of ammonia 
and- 1,725 tonnes of urea a day, 
mainly to India and China. 
Earnings are estimated at 
gloom a year. If all goes well, 4 
per cent of the company will be 
floated on the Dhaka stock 
exchange in September, and 
the company will start export- 
ing in October. 

Purchase agreements have 
been secured for all K&fco’s 
output, and a complex financ- 
ing package is in place, 75 per 
cent of it in government- 
backed debt and the rest in 
equity. 

The project has bad a trou- 
bled history. In 1990, it was 
suspended for a year - at a cost 
of $35 tn - when the newly- 
elected government of the Ban- 
gladesh National Party refused 
to honour government guaran- 
tees for the project’s $4 00m 
loans. At the time, there were 


tUm under business and contract law. 

Mr Ian Sangster, managing director 
of Lever Brothers Ba ng la d esh, the UK 
subsidiary, complains about copyright 
infringement and the lark of intellec- 
tual property rights. He points to a row 
of soaps on a shelf at the company's 
Chittagong headquarters, imitations of 
Lever’s famous Lifebuoy brand: Life 
Bath, Iikeboy, Life Joy and Lucky Boy. 
Lever’s Wheel household soap sells var- 
iously as Wheel!, Wheal and Wliii. 

“It’s a massive problem,” says Mr 
Sangster. “But there is no support from 
the law. It is not a criminal offence.” 
He also points to the slow pace of mov- 
ing goods. “It can take four to six 


weeks to get a consignment cleared 
through customs, where It would take 
as many days in the UK. That delay 
costs us.” 

Some businessmen complain about 
constantly changing faces in govern- 
ment ministries and the Blow pace of 
legislative reform. Others says that 
borrowing costs to business are higher 
than they should be because banks foil 
to folly differentiate b etween their best 
and worst customers: “So Pm paying 
Hie cost of other people’s bad debts.” 

Mr K.M. Iqbal, deputy general man- 
ager of James Finlay, the UK trading 
company based in Chittagong, says the 
government's tariff str u c tur e penalises 



Companies and agencies from ffm countries are involved In the $510m Chittagong fertfflsar project 

Sheila Jones on a project with a troubled history 

Problems linger on 


allegations of corrupt deals 
with the previous government 
The BNP agreed to back the 
loans in 1992 only in mrrhang g 
far places an the Kafco board 
and an increase in the gas 
price from the previously 
agreed 75 cents per thousand 
standard cubic feet to $L 
Now, with those political 
troubles in the past Kafco is 
bracing for business. 

But there are still problems. 
Production of ammonia and 
urea requires two main raw 
materials; water and natural 
gas. At the moment there is 
no gas. It is available - in Ban- 
gladesh's northern gas fields 
-but there is no pipeline to 
bring it south to the plant 
A pipeline was to have been 


built to complete the north- 
south link by the end of this 
year. But it to mate- 

rialise. Construction and finan- 
cing - originally expected from 
the World Bank -are still In 
doubt 

The Government of Bangla- 
desh, which is a 40 per cent 
shareholder In the project, has 
told Kflfivi that Hie Ashuganj- 
Bakharabad (A-B) pipeline will 
go ahead. In Hie meantime, it 
has promised to supply gas by 
rehabilitating two gas wells at 
Bakharabad, north of Chitta- 
gong, and to start drilling 
another at Fern. These, says 
the government, will supply 
the plant until the A-B pi peline 
is built 

“Kafco will get its gas," says 


Mr Khandaker Mosharraf Hos- 
s atn , the energy minister. “We 
have enough to supply the 
plant for two to three years.” 

Kafco can only wait and 
hope. But much is at stake for 
both Bangladesh and its for- 
eign partners, led by Chiyoda 
of Japan, which is also lead 
contractor. Other big foreign 

ghatehnlrfar ff flrw MfornhffTTi 

the Overseas Economic 
Co-operation Fund, both of 
Japan. Smaller stakes are held 
by the Commonwealth Devel- 
opment Corporation ci the UK, 
Haldor Topsoe of Denmark, 
and Stami Carbon of the 
Netherlands. . 

The bulk of the funding is 
from Japan’s export credit 
agency, with 8250m in loans. 


local producers. “It can be cheaper to 
Import a finished product than to make 
it here,” he says. “Even efficient com- 
panies are finding it tough.” 

But James Finlay, like Lever 
Brothers, has been in Bangladesh for 
many years and intends to stay. It is 
well established, knows the system and 
is making profits; Tk64m last year 
before tax, on turnover of Tk845m- It ts 
the newcomers which Hie government 
is finding difficult to attract. 

“These is a lot of apparent political 
instability frightening investors -and 
they’re partly right,” says Mr IqbaL 
"But democracy takes time. Inevitably 
there will be teething problems.” 


anri yphn from Italy’s export 
credit agency. There is a SlOQm 
commercial loan syndicated by 
Citibank, with the rest of the 
funding from the UK’s Export 
Credits Guarantee Department, 
a 8B ta grant from Denmark’s 
development aid agency an| i a 
soft loan from the Nordic 
Development Fund. 

Kafco stands to lose $8m a 
pin n tfr if ft is unable to start 
operating. The company says 
the government will have to 
pay interest an the loans due 
in July next year if it foils to 
supply the plant with gas. 

For Bangladesh, the Kafco 
project is important as a model 
for other foreign investors, 
which the country desperately 
needs. If it flops, foreign inves- 
tors might be unwilling to risk 
their money a gain _ 

The government is not con- 
vinced that the Kafco project is 
perfect for Bangladesh, but it 
now feels it cannot allow it to 
faH “There is no scope for sec- 
ond thoughts on this project,” 
says the energy minister. “It 
has reached the stage where it 
must go ahead. But if someone 
came along now and suggested 
constructing such a plant, I 
would discourage it” 

Kafco’s manag in g director, 
Mr M-Towhidi, grits his teeth 
and smiles. He, too, believes 

Kafm has to go aTiaari 

“This is the ultimate test of 
whether projects of tids magni- 
tude are ever likely to succeed 
in Bangladesh,” he says. “The 
country is hungry for foreign 
investment and everybody is 
watching to see what becomes 
of Kafco. They are watching to 
see if Ban gladesh honours its 

rornmitTnentg- 

“I have no reason to doubt 
that it will, but it win have to 
get gas to us on tfrp» Other- 
wise, we’re going to be a big 
white elephant" 


Life expectancy at birth 

.Bangladesh 


Adult literacy 


GDP per heed: 



- T 6 ao 40 60 80 0 40% 80% .0 1.000 3,000' v. 

Yews percentage q* population 

MfaStttQtM* . . " ' I 1 - 

Pr ofile; Bangladesh Rural Advancement Committee 

Aid for the poorest 


Hawahibi. a 35-year-old village 
Tttrrthw of four, was destitute 
nptfl she borrowed Tk7.000 to 
erect a rhirken coop and buy 

nirtn h^na and a lOOSter. 

Six years later, she has built 
herself a house of wood and 
bamboo and a shed, and has 
gntutg h money to send her chil- 
dren to secondary school 

The loan that changed her 
life came from the Bangladesh 
Rural Advancement Commit- 
tee, the biggest non-govern- 
ment organisation in Bangla- 
desh and one of the world’s 
largest development aid insti- 
tutions in toms of the number 
of people that it reaches. 

“Without BRAC's loan, we 
could never have thought of 
i m proving our standard of liv- 
ing,” says Hawabibi. who lives 
in the densely-populated rice- 
growing district of Mirzapur, 
north of Dhaka. $ he is one of 

480.000 Bangladeshi women to 
have received BRAC loans to 
rear chickens, while about 

400.000 have borrowed money 
for cattle, tea planting, silk 
farming, irrigation schemes 
and weaving. BRAC has also 
taught 13m women how to 
treat diarrhoea; it runs 22JH0 
primary schools and plans to 
have 100,000 by the year 2000. 

BRAC shows what can be 
achieved in Bangiadash, even 
with limited resources. A non- 
profit making organisation. It 
receives 70 per cent of its 840m 
annual income from foreign 
aid donors. There is a high pri- 
ority on cost control and mak- 
ing the most of its funds. 
BRAC’s schools operate at 
lower costs than the govern- 
ment’s. In its credit operations, 
bad debts run at under 2 per 
cent of lending , even though 
borrowers are charged annual 
interest of 20 per oent 


As for revenue, BRAC tries 
to generate as much of Its own 
as possible - 30 per cent of Us 
income comes from commer- 
cial activities, including a 
chain of handicraft shops. This 
month it will open its first 
overseas outlet - in Islington, 
London. 

In 1972, Mr F.H.Abed, a for- 
mer accountant with Shell, the 
international oil group, set up 
BRAC in the wake of Bangla- 
desh’s independence war cnH 
with the help of money from 
Oxfom, the British charity, its 
first work was post-war recon- 
struction, particularly the res- 
toration of damaged homes. 

Mr Abed devised the plan to 
open BRAC handicraft stores 
overseas. It was also his sug- 
gestion that the British govern- 
ment should recruit unem- 
ployed British graduates as 
teachers to work in BRAC 
schools for a year or two. 

BRAC’s schools generally 
cats* for children who are so 
poor they would usually have 
no education at alL However, 
the quality of education pro- 
vided is widely regarded to be 
better than that of rural gov- 
ernment schools. BRAC 
recruits part-time untrained 
graduate volunteers as teach- 
ers because they are cheaper 
than qualified professionals; it 
maintamg standards by provid- 
ing intensive training courses, 
highly-structured material for 
use in ebw » and frequ ent moni- 
toring. 

The combination is so effec- 
tive that BRAC’s methods have 
been praised by Unicef, the 
United Nations organisation 
for children, and copied by 
other countries. 

Today, BRAC’s most delicate 
political problem comes in 
fending off attacks from con- 


servative Islamic clerics, who 
condemn its efforts to elevate 
the status of women as “Chria- 
tianisation”. 

“We get a lot of flak from the 
mullahs,” says Mr Abed. About 
5 per cent of the 700400 chil- 
dren at BRAC schools have 
been kept away from class by 
parents influenced by the 
clergy. Some mullahs have 
even ruled that membership of 
a BRAC credit cooperative fa 
grounds for divorce. 

But Mr Abed believes 
strongly that bringing women 
into economic activity is vital 
to Bangladesh's future. The 
majority of participants in 
BRAC schemes are women, 
whom BRAC has found to be 
better credit risks than mm 

Mr Abed says women benefit 
more from BRAC than men 
because they are new to work 
outside their immediate house- 
hold and so are more conscien- 
tious. Also, women are, from 
an early age, brought up to 
bear responsibilities, first for 
their younger siblings and 
later for their own children. 
“In the 1975 famine, men des- 
erted their families to look for 
food. Women stayed with their 
children. Survival in the vil- 
lages depends more on women 
than on men." 

While Bangladesh has seen 
steady economic growth, par- 
ticularly in the past three 
years, half of the 120m people 
live below the government’s 
poverty line. Mr Abed believes 
the poor will not benefit unless 
the growth rate rises from 
recent levels of 4-5 per cent 
annually to 6-7 per cent “In 
the meantime, we must target 
programmes at the poorest 
people." 

Stefan Wagstyi 


BANGLADESH 



A NEW HORIZON FOR PROFITABLE 
FOREIGN INVESTMENT 

Soprised? Well, don't be. Bangladesh is a land of opportunity far foreign investors. Aa the glut centmy 
approaches. Bangladesh, with its vast and drrerae economy, is poised to become one of Asia’s k«y emerging industrial locations. 

Bangadeah offers a wide array of attractive incentives that will best serve year needs. But what makes 
Bangladesh unique is a young highly adaptable work fores and s strategic location at the doorstep to markets in 
both the Kaat and West Together these feature and the connfcty'a libernKaed investment and economic policy reforms cranHmu. tn mola 

Loweat-coet production base you will find anywhere on the globe. 

Take a look at just a few of tha benefits we offer to help your business grow: 

• generous tax holidays 
* opportunities in virtually an industry sectors 
• relaxed foreign exchange controls 
• unlimited equity participation with no approvals necessary 
• easy access to work permits 
• sim pl ifi ed administrative procedures 

And many more incentives and programmes, all designed to make it easy for foreign investors to take advantage of opportunities for business growth. 

There's never been a better time to incest in Bangladeshi 
For man information contort: 

Executive Chairman 

Fax: 880 (2) 833 626. Telex: 643 212 BOI BJ 



Board of Investment 

Prime Minister 1 a Office 
Sfaflpa Bhahan, 92 Mo$hee3 C/A 
D halrn , Rm^aitaili 


NEW LOOK AT JUTE 

After the Earth Summit the world took a new look at natural 
fibre jute, the age old packaging material for all kinds of 
agricultural and industrial products, rediscovering its 
environment friendliness and biodegradability. Continuous 
research and development has made possible natural jute to 
spring many surprises in its infinite appearances from carpet to 
cloth hangings, wall covering to tapestries, shopping bags to 
brief cases and even dresses from head to foot. 

Bangladesh Jute Mills Corporation 
World's biggest manufacturer and exporter of Jute Goods. 
Adanjee Court, Motijheel C/A., Dhaka, Bangladesh. 

Phone: 880-2-238182-6, 238192-6 
Fax: 880-2-883329, 880-2-883985 
Telex: 675662 & 842224 BJMC BJ. 

BJMC: 323 




LONDON FESTIVAL OF 


Bangladesh 


Doing Business with Bangladesh 
Seminar: July 1, 1994 10am - 1pm 
The Auditorium, Spitalfields Market, 
Commercial Street, London El 

A major Trade Fair is to bs held promoting trade between Britain nnd Bangladesh. A range of 
Bangladeshi companies will be displaying their products and services. There will be a seminar 
on Hus first morning of the Festival on the commercial prospects that Bangladesh now holds 
Speakers will include Bangladeshi and British Foreign Ministers, bilateral trade experts and 
buan«s people. Tickets for the seminar are £30 each and available from the London Festival of 
Bangladesh, 8 Cavaye House, Cavaye Place, London SW10 9PT. To find oul more about the 
Festival and the Trade Fair, please call Maria Muller on 071 370 3377. 



WINNING 

BUSINESS 

IN 

Bangladesh 

Contact 

Bangladesh-British 
Chamber of Commerce 

41 Chamberlayne Road 
London NW1O3N0 
Tel: 081 960 3852 
Fax: 081 960 3556 






i 




























































































































































































































































































































































FINANCIAL TIMES MONDAY MAY 9 1994 


33 


CURRENCIES AND MONEY 


MONEY MARKET FUNDS 


POUND SPOT 




Ai NST.TH t . DOLLAR 






V 

i 






MvS Ctadng Change 8M/ofler Day's MW One month Three months One year Bank of 

mkt-potnt on day spreed high lew Rale %PA Bate KPA Rata MPA Eng- tndsx 

Bmps 

Austria (Sen) 170198 -0040? 102 - 2B4 170011 17.5001 17.518 03 175104 02 - - 1135 

Bolghan (Bft) St.1876 -0J108 809-122 514990 51.1070 51.1888 OH 51.2128 -02 61.0126 03 11S.1 

Dorawk (DKiJ 9,7343 -00382 286 - 380 9.7823 9.7160 9.7445 -15 07576 -1.0 9.767S -03 1145 

FWend (PM) 00870 -0.0343 563 - 776 01250 00470 - - - - SIS 

Prance (PFi) 05227 -00342 187 - 267 05712 05116 05279 -0.7 05337 -05 04969 03 107.6 

Qttmany (CM) 2.4858 -O011 844 - B73 05068 04621 04857 0.1 04853 0.1 0466 08 1203 

Greece (Dr) 360317 - 2 JD 61 821 - 812 380273 360199 - - - 

Ireland 06) 1.0284 -00032 255 - 273 10321 1JD221 1JJ27 -0.8 1X1283 -07 1X1303 -04 103-6 

Italy u 2387.72 -1928 580 - 964 240034 2383.52 238087 -3.1 240097 -2.7 243027 -2.0 702 

Luxembourg flLR) 51.1878 -02108 629- 122 51.4990 51.1070 51.1828 01 Si .2126 - 0.2 51.0126 03 115.1 

Netherlands (R) 2.7917 -00125 900 - 934 08084 2.7887 2 7917 OO 27911 0.1 27704 08 1106 

Norway (MO) 10.7855 -00529 B04 - 908 108573 10.7643 107789 06 107824 -03 107836 OO 840 

Portugal (£a) 250222 -0995 061 -382 257X341 250212 2S7.197 -4.8 299.142 -40 - 

Spam (PTaj 200001 -0383 B58 - 144 200037 204423 205021 -OO 200468 -2.9 200321 -21 B4.S 

Sweden (SKr} 11.4999 -00544 804 - 093 11-5744 11.4717 11-5200 -&2 11 5569 -2X3 1107S8 -15 77X3 

Switzerland (SFr) 21132 -00102 120-144 21284 21105 211T2 1.1 2.1067 1X1 2075 1.B 117.7 

UK » 705 

Ecu - 1.2909 -00061 902 - 918 1X2979 1-28BS 10917 -07 1X292S -OS 1X28S7 02 

SDR - 0944987 - ........ 

Amertoae 

Aiyentha (Peeo) 14886 -00062 882 - 694 1.4900 14864 - - - - - 

Brazfl (Cl) 2107.19 +2741 647 - 791 211000 207000 - - - 

Canada (CS) 20624 -00123 613 - 634 2.0741 20804 00638 -OB 20694 -1X2 20834 -12 80S 

Mexico (New Paso) 4.9385 -00113 294-476 4.9478 4.8234 - - - 

USA (S) 1.4920 -00048 915 - 925 1.4983 1.4896 1.4907 1X1 1.4886 07 1/4688 03 804 

Ptodta/MkOte Eaat/Aftfca 

AuetraBa (AS) 20663 -00078 848-877 20939 20792 20648 09 20624 07 2X3606 03 

Hong Kong (HKS) 110282 -00381 236-328 110744 110094 113162 1.4 11.5098 06 11.4607 06 

mefla Fta) 480041 -01471 809 - 272 409940 407330 - - - - - - 

Japan (V) 153.348 -0381 252 - 444 154440 153.140 152968 3X1 152X338 29 140553 3.1 1803 

M riny o lx (MS) 3-9419 -00447 391 -447 29735 30381 - - - - - - 

New Zeeland (NZ» 25885 -00042 845 - 884 25958 25820 25894 -15 25937 -1.1 25023 -08 

PWpptoeo (Peso) 405826 -01292 451 - 199 40.8199 403451 - - 

Saudi Arabia (SR) 5X5954 -0018 933-975 54189 05864 - - - - - - 

Singapore fSS) 2-3218 -0.0098 200 - 231 23332 23192 - - - - - 

S Africa (Com.) (R) 03388 -00817 358 - 417 54238 03327 - - - 

S Africa (Fto) (R) 7.0050 -01648 877-222 7.1819 6.9622 - - - - 

South Korea (Won) 1204-87 -1.68 409 - 564 120093 1201.40 - - - 

Taiwan TO 390977 -00961 844 - 110 39.7400 39X5200 - - - - 

Thailand (®) 375910 -01571 709 - 110 37.8930 370610 - - - 

ISOn raw tor May 5 BUMk wraad* In Hm Round Spot recto em> only nra Ih Haw deefem otaea*. Ftnad rataa are net remedy quoted to MowW 

bue are knpaad ay euwt k«MK IBM. 8Mdno wire eauretad by bw Banii o( Enatand. Bare aueaga ie« - 100AL OIMr and UdreM in b«i mh md 

dw Outer Gpot hum dorivw Item HE WMffEUIEFB dons SPOT RATES. Soma nkras are reundod by Km F.T. 


MayB 


Oaring Charge BM/Offer 
mid-point on day epwed 


Day's mid 

high lew 


one month Three months One year J.P Morgan 
Rate <KPA Rata ttPA Rata 94PA redo* 


Europe 

Austria 

Belgium 

Denmark 

Finland 

Franca 

Germany 

Greece 

Ireland 

Ha* 

Luxembourg 

Netherlands 

Norway 

Portugal 

Spain 

Sweden 

Switzerland 

UK 

Ecu 

SDR 


(Sell) 

(SFr) 

(DKi) 

(FM> 

m 

(D) 

Pr) 

W 

w 

m 

P) 

(NKr) 

(Ea) 

(PW) 

rsK4 

(Sft) 

B 


11.7425 

34X3060 

05243 

5.4069 

5.7123 

106G1 

244350 

14537 

180035 

34.3080 

1.8711 

7226B 

171.730 

137.400 

7.7077 

1.4184 

1.4920 

1.1568 

1 j 41370 


Argmtna (Paso) 


Canada 


09079 
(Or) 141233 
1X3823 
30100 


C$) 


Mexico (New Paso) 

USA (SI 

Pacfflc/Mkfcfle EastMMca 
Auxtmta (AS) 

Hong Kong (HKS) 7.7267 
Mi Pa) 31.3700 

Japan (V) 102780 

Malaysia (MS) 28420 

Now Zealand (NZS) 1.7336 
PhUppinee (Pees) 271000 
Sajd Arabia (SR) 3.7603 
Singapore (S5) 1.6600 

S Africa (Com.) (R) 35783 

S Africa (Hn.) (FQ 48950 
South Korea (Won) 807550 
Taiwan TO 265400 

(Bf) 25.1950 


<0.0105 400 - 450 
-0.032 030 - 130 
-00035 233 - 253 
-00058 018 - 121 
-00047 115 - 130 
-00021 6S7-665 
-06 600 - 100 
-0.0001 529 - 544 
-7.8 geo - 110 
-0.032 030 • 130 
-0.0024 706 - 716 
-0.0124 279-298 
-012 680 - 760 
<018 350 - 450 
-00119 039 -114 
-00023 160-167 
-00048 015 - 825 
<00017 555 - 560 


-0.0009 978 - 979 
<228 232-234 
-0X3039 820-826 
<0003 050 - 150 


11.7725 

11.7225 

11.7575 

-16 

11.7876 

-06 

11.7426 

06 

mo 

34.4850 

34.2750 

34643 

-12 

34678 

-OB 

34643 

-ai 

104.4 

&6S24 

66164 

6636 

-2.2 


-1.7 

66605 

-as 

1017 

5.4408 

5.3906 

24108 

-06 

04178 

-06 

5.428 

—04 

78.7 

5.7430 

5.7075 

5.7208 

-1J 

5.7281 

-12 

5.7163 

-0,1 

104-0 

1^785 

1.6644 

16676 

-1.1 

1.6685 

-06 

1.6566 

05 

104.7 

240200 

245.100 

2426 

-164 

255.075 

-186 

28465 

-16,3 

701 

1.4581 

1.4485 

14511 

21 

14473 

16 

14332 

16 

- 

161226 

159766 

100565 

-4.1 

161185 

-14 

1B3765 

-26 

786 

34.4850 

1L2750 

34643 

-12 

34.378 

-06 

34643 

-ai 

104.4 

1.8810 

16693 

16727 

-1.1 

16737 

-0,6 

1.8788 

-0.4 

1018 

72BB2 

7X2031 

76376 

-16 

72301 

-16 

76608 

-04 

046 

172250 

171.100 

172965 

-16 

17463 

-7.5 

17063 

-46 

<» a 

137.630 

138650 

137665 

-4.1 

138605 

-36 

140.775 

-25 

800 

7.74S0 

7.6765 

7.7312 

-a? 

7.7705 

-3.3 

7.8797 

-12 

826 

1^253 

1.4145 

1.4185 

-0.1 

14143 

06 

16957 

16 

1019 

1.4683 

14895 

1.4907 

1X1 

14896 

0.7 

1.4668 

06 

88,4 

1.1569 

1.1510 

1.1541 

1.7 

1.1S2S 

1.1 

1.1537 

06 

; 

0.8070 

06978 


. 

. 

. 

. 

. 


141234 1412J2 

re 

- 

- 

- 

- 

- 

- 

1.3850 

16807 

1X3845 

-16 

1J886 

-16 

1.4046 

-16 

810 

13150 

3X2SOO 

3611 

-04 

3X3128 

-06 

n aom 

-06 

_ 

- 

- 

- 

- 

- 

- 

■ 

- 

100.1 

1.4000 

1-3937 

16905 

-1.1 

14042 

-1.7 

14148 

-16 

a*s 

7.7272 

7.7262 

7.7287 

-05 

7.7357 

-06 

7.7604 

-04 

- 

31.3775 31.3650 

31435 

-25 

3167 

-28 

- 

- 

- 

103X250 102650 

102615 

16 

102205 

22 

0193 

28 

148.7 

26560 

2.B3B5 

2836 

36 

26195 

34 

2682 

-16 

- 

1.7361 

1.7304 

1.7343 

-06 

1.7394 

-16 

1.7*13 

-1.8 

- 

27.3500 276500 

- 

- 

- 

- 

- 

» 

- 

27504 

27501 

1751 

-02 

17533 

-06 

17848 

-0.4 

- 

16680 

1.5555 

16554 

06 

1.6649 

06 

16535 

06 

* 

36285 

36680 

15948 

-OS 

16208 

-46 

17138 

-18 

- 

4.7050 

46450 

4,720 

-8.7 

4.789 

-86 

- 

- 

- 

807.800 805600 

81Q6S 

-46 

814.05 

-36 

83255 

-11 

- 


CROSS RATES AND DERIVATIVES 


EXCHANGE CROSS RATES 

May 6 BFr DKr FFr DM 


-0X1008 078 - 
<00004 282 - 
<00012 650 - 
<0X185 750 - 
-00215 410 - 
<00027 328 - 
- 500 - 
-0 0001 501 - 
-0.0017 555 - 
-00432 775 - 
-0.095 850 - 
+1.45 300 - 

<002 400 - 400 26-5400 205300 26X3055 -3.0 28.706 -2-5 - 

-0025 900 - 000 25X3000 26.1900 26.275 -34 25.4 -30 25.92 -29 

1S0R rata tor May 5, Btyofler aprewta to dw Deter Spot taae shew oUy the last dwae dacenW ptan Forward raws are nu dkacOy quoted to dw marut 
but are touted by currant toten u t rates. UK Ireland 4 ECU ore owned n US amney. XP. Morgan nominal totfou May EL Baaa ovaraga lOWalOO 


FIXED INTEREST RATES 


Traoore, Acrewa -brre 

BIIHwre 


mM— 

1505 



3.75 


hT 


najjoo- c!4.ii*i 



rano-ntnt 

UK 


■tore lanaig 

• J* 

droid tur 


NKr 


Pta 


CS 


Ecu 


EMghim 


vre _ ■ 

Cm V.g'wF 


r - 4=-^ 


Norway 

Portugal 

Spain 


UK 


US 


Ecu 


(Bft) 10 
(DKr) 6258 
(FR) 8008 
(DM) 2000 
0Q 49.88 
(U 2.143 
(B) 1034 
(NKr) 4748 
(Es) 19.98 
(Pta) 2497 
(SKr) 4430 
(SFr) 2422 
CE3 51.18 
(CS) 24.02 
(8) 34X30 
(Y) 333.9 
39L84 


19X12 

10 

11.42 

0917 

9.487 
0-408 

3.488 
9.030 
3.7B9 
4748 
8.464 
4.807 
9.734 
4721 
6.524 
63.60 
7X340 


16X55 

8765 

10 

3429 

8X306 

0 X 157 

3X153 

7008 

3X328 

41S7 

7.410 

4033 

8X322 

4133 

5.712 

55X38 

8.801 


4X3S5 

2653 

2X716 

1 

2422 

0.104 

0890 

2306 

0970 

1012 

2161 

1.178 

2485 

1205 

1.666 

1021 

1.925 


VM par 1000; Dwtefa Kroner, Anwidi Franc, Ma i —o ta n Kna, Orated) 


nmjRES OMM) DM 125,000 par DM 


2005 

1X154 

1-204 

0413 

1 

0043 

0388 

Q ftffr 

0400 
0500 
OB92 
0488 
1X126 
0.498 
0888 
6.883 ' 
0795 
Krona 


2463 

2802 

961X1 

2327 

100 . 

8S5X1 

2215 

932.1 

1185 

2077 

1130 

2388 

1156 

1601 

15577 

I860 


5.453 

2887 

3-275 

1.123 

2720 

0.117 

1 

2580 

1.089 

1.381 

2427 

1221 

2.791 

1.354 

1071 

1021 

2182 

Fane 


21X16 

11X17 

1265 

4.338 

1051 

0451 

3082 

10 

4208 

nww 

9374 

6.102 

1078 

0228 

7226 

7032 

8360 


5005 

pflg.y 

■win 

103.1 

249.7 
1073 
91X10 

237.7 
100 . 
125X1 
2228 

121.2 
2660 
124.2 

171.7 
1871 
1905 


par 1ft Escudo, Lire 


4005 
2108 
240 j 8 
8249 
199X1 
0585 
73.45 
1902 
8002 
100 
1703 
97X12 
206X1 
9042 
137.4 
1337 
1608 
and 


2247 

11.81 

13>tS 

4.628 

11X21 

0/482 

4.120 

1067 

4.489 

5.610 

10 

5.442 
1150 
5577 
7.708 
75X12 
0908 
par 100. 


4.129 1554 4.025 2915 2995 2522 


MONEY RATES 

Mayfl Over One Three Sot One LomtJ Dte 

(tight m or rtn mthb mUa. year mtar. min 


Repo 

rate 


2171 

1X127 

2118 

1633 

1576 

1626 

Belgium 

Si 

5% 

5fc> 

54 

5fl 

7.40 

4.75 

2479 

1.173 

2420 

1.751 

1796 

1615 

wort ago 

5» 

5U 

5* 

5N 

SB 

740 

4.75 

0850 

0402 

0830 

0600 

81.69 

0620 

France 

5% 

5% 

51k 

5% 

5H 

5,70 

- 

2050 

0675 

2010 

1.464 

1494 

1658 

week ago 

5% 

554 

5g 

5* 

SB 

5.70 

- 

0088 

0.042 

OXKH 

0002 

6.420 

0X154 

Germany 

568 

562 

560 

5.12 

567 

. 660 

5xn 

1757 

0358 

0739 

0635 

5463 

0463 

week ago 

568 

562 

668 

562 

568 

8X50 

500 

1680 


1613 

1684 

1422 

1.196 

kufamd 

5% 

SB 

6 

B4 

64 

- 

- 

0625 

0690 

0605 

0682 

5964 

0604 

week ago 

5% 

SB 

6 

64 

B4 

- 

- 

1631 

0488 

1606 

0.728 

74.7B 

0630 

Italy 

6% 

8 

7B 

78 

8 

- 

760 

1637 

0870 

1.783 

1697 

1336 

1.123 

weak ago 

8% 

8 

8 

8 

84 

- 

860 

1 

0473 

0676 

0708 

7265 

0*11 

Netherlands 

6.46 

5.15 

5.11 

610 

5.10 

- 

565 

2113 

1 

2062 

1492 

1613 

1691 

week ago 

646 

5.15 

569 

5X28 

567 

- 

566 

1625 

0485 

1 

0.724 

7465 

0626 

Swftzsriand 

3fl 

H 

4 

4 

44 

6.025 

360 

1416 

0670 

1682 

1 

1027 

0666 

week ago 

35 


4 

4 

44 


360 

1178 

6623 

1345 

9.733 

iooa 

0421 

US 

35 

44 

4W 

5 

5H 

- 

100 

1637 

0775 

1697 

1.156 

118.7 

1 

week ago 

35 

44 

4 Vl 

4 % 

5 Vi 

- 

100 







Japan 

2* 

2» 

2H 

2V, 

25 

- 

1.75 







week ago 

2tt 

2M 

2» 

2* 

2fl 

- 

1.75 


7.75 

7.75 

5/47 

5.47 

050 

550 

857 

027 


... K 

.in ^ ^ , , mm 


Open 

-Salt pries 

Change 

High 

Low 

EsLvoi _ 

Open mt. 


Jun 

06691 

06017 

nrm 

06020 

06858 

48688 

110.061 


Sop 

n«M 

06018 

♦a 0024 

06020 


2478 

5687 

^ • i | .. 

Dec 

- 

06031 

+00027 

06030 

16086 

9 

211 


UK INTEREST RATES 


LONDON MONEY RATES 

May 6 


■ S LIBOR FT London 


Over- 

night 


7 days 
notice 


One 


Three 


Six 


One 


flBALft SFr 125,000 per SFr 




V-kfV 


Jun 

a 7064 

0-7081 

<06020 

17087 

27016 

11675 

39649 

Sep - 

0.7064 

27103 

<20024 

27110 

27035 

103 

778 

Dae 

17080 

17137 

+10028 

27140 

27075 

4 

339 

■ JAPANKM YIN RltURES PMM) Yen 126 per Yen 

100 




Open 

Sett pries 

Changa 

High 

Low 

EsLvol 

Open Int 

Jut 

06746 

06788 

<140 

29792 

29700 

23637 

00630 

Sap 

18800 

06857 

<144 

0.9860 

29774 

746 

3694 

Dae 

“ 

28933 

<147 

06920 

29870 

14 

646 

■ 9nBHJMOPVnin»(IMM)eB2600par£ 




Jun 

1.4964 

1.4932 

-10042 

1.4964 

1.4880 

9435 

• 47,686 

Sep 

14964 

14920 

-00034 

14964 

1.4886 

110 

1,180 

Dec 

1.4900 

14822 

-06028 

14930 

14000 

- 9 

37 


Intarbonk Staring 

5% -4h 

B’d - 5 

S&-S i\ 

5^1 - 5*s 

^ ft 

5tl-5H 

Sirring CDs 

- 

- 

5>a-5i 

3d -51 b 

5>B-5A 

5%-sa 

Traoatry 80s 

- 

- 


4U-4B 

• 

* 

Bank BUs 

- 

- 

4S-4% 

431-4B 

9«.Si 

. 

Local autturily dape. 

4a-4jj 

4S-4H 

Stf& 

6d-5d 

S%-5«4 

5d-Sd 

Dtocount MwhM DapC 

55|-5 

5A -6 Ik 

- 

- 

- 

- 

UK dearfeig bonk bm lendng tea 5^ per cant from Febmory B. 1994 

Up to 1 1-3 3-6 6-9 

ntordh month months months 

9-12 

months 

Cette of Tax dap. (E100600) 


4 

3* 

3% 

3>j 


tatarttank Ftdng 

4ft 

4ft 

48 

Sft 

- 

- 

- 

week ago 

4ft 

4ft 

4ft 

3ft 

- 

- 

- 

US Dote CDa 

- 4.05 

440 

465 

548 

- 

- 

- 

weak ago 

- 4.05 

4.10 

461 

210 

- 

- 

- 

SDR Lbiknd Da 

3R 

4 

4ft 

4ft 

- 

- 

- 

week ago 

3R 

3ft 

3ft 

4 

- 

- 

- 


ecu LMoad Da add rates: 1 mOc 6 ; 3 mtac Sfi: G tmlac SMC 1 yaw; &£. S LBOR I mortal* String 
retaa am oMamd aa lor 91 Dm quoad to dw marfcat by four re ferenda tarts d iiam each « ahg 
day. The banka aa: D an ka s a Trim, Bank or Tokyo, Bordaye and Makorwl WdJUiit rater. 

Mid rams wa drown tor Sw domnaa c Monay Raw US S CDs and 80R LkAad Dapodw (Dej. 

EURO CURRENCY INTEREST RATES 


May 8 


Short 


7 days 
notice 


One 

month 


Three 

months 


Six 

months 


One 

year 


■ PHLADCLPIBA 88 X/S OFTtOKS C31.260 (carta per pound) 


Certs of Tax dep. wida DOOXMO rt 1>Mrc. Dapodw wknaram torcnrti Vpc. 

Ana. tend* rear ol dbooure 4^eaapc. ECQD ttmd rare Sdg. Export Fkanoe. Maka w day April 22 
1SB4. Agreed mta tor period Mtay 26, IBM k>5n 25. lB04.Sehanae I GB BJepc. Reference mo tor 
period Apr 1. 1804 ID Apr 2B. 1884, Schamae WAV sxawpc Finance Howe Base Ran Shpc fiwn 
Mgl.lBM 

RANK OF ENGLAND TREASURY BILL TENDER 



Way B 

Apr 29 


May 8 

Apr 29 

fltaOBOfhr 

■ MOOm 

E40Ore 

Top accepiad rare 

46734ft 

46533ft 

Total ntappfcallom 

El 663m 

El 824m 

tee. rets of (heart 

46668ft 

48488ft 

lota atocattri 

£400n 

£400b 

teetago yWd 

46268ft 

46078ft 

Ha aenpta! bid 

£98.785 

£98.790 

OOre re rm trader 

E400n 

Ittta 

Airew* re aia. tare 

30% 

57ft 

Mo. dosspL W 182 dqs; 

- 

- 


Belgian Franc 

6% 

-3*2 

Sft 

•Sft 

5*2 

■ S% 

s*a 

-5% 

BA 

-5A 


-6*2 

Danfrti Krone 

04 

-s\ 

6*< 

-5^, 

6*8 

-«2 

6*4 

-sa 

BA 

-sa 

6*a 

-5J| 

D-Marii 

5*. 

-5*2 

5ia 

-BA 

5A 

-5A 

5*a 

- 5 

6A 

■4B 

St* 

-4H 

Dutch GoOder 

5A 

-u 

5A 

-Sft 

5*4 

-5*1 

5A 

- si 

SA 

-SA 

si 

•SA 

French Franc 

5iJ 

-5 H 

611 

-BH 

5% 

•E* 

SM 

-6^ 

S*| 

- E*z 

sh 

-5*2 

Portuguese Esc. 

12*2 

- 12*4 

12*s 

-11^ 

11* 

- 11*B 

12*4 

- 11% 

11*2 

-11 

10% 

- 10% 

Spantah Peseta 

7S 

-75, 

7 a 

-7^, 

B A 

-7* 

8A 

-7% 

B*| 

■7B 

B*« 

-7B 

Steriluj 

5*a 

-4% 

Si 

-6A 

6A 

-5ft 

SA 

-5A 

S*2 

-5ft 

8- 

5% 

Sates Franc 

3% 

-3\ 

4 - 

34, 

3U 

-3tJ 

4 - 

3% 

4 - 

3% 

4- 

3% 

Can. Dolar 

5% 

-sh 

53 

-sa 

sa 

-sa 

6ri 

-BA 

BV 

-6% 

7*4 

-T*« 

US Dote 

4 - 

3% 

*i* 

-3B 

4*4 

• 4*i 

4tJ 

-4A 

SA 

■4B 

BH 

-6A 

Hatton LbB 

9 - 

7*a 

B- 

7*2 

B - 

7*2 

8 - 

Th 

B - 

7% 

B*a 

■fh 

Yon 

zft 

-2*1 

2A 

-2*4 

2A 

-2*4 

2A 

-2*4 

2 A 

-2* 

2% 

-2A 

Aslan SStog 

3*2 

-2*2 

3*2 

■2*2 

3*2 

-2*2 

4 

-3 

4 

- 3 

4% 

■3*4 


*. — i 

V • 


Strike 

Price 

Mta 

— fnkl »« - 
Jill 

Jii 

May 

- PUTS — 
Jui 

Jli 

1-425 

665 

665 

8.78 

- 

009 

063 

1650 

4X77 

465 

462 

- 

037 

294 

1676 

161 

266 

116 

lie 

1X71 

1.78 

1600 

136 

164 

166 

160 

260 . 

263 

1628 

- 

051 

1.10 

129 

360 

466 

1660 

- 

H6 

067 

5.74 

104 

660 

Antal (toy* voU Ctan 17,781 Rida 21030. 

, Pm. days upon ML, Cate 498,132 Pres 412674 


Sot Mm rarea are cal tor die uc Dotar and Van, odwnc two daya' nodoa. 
■ TWMMOffTMBWWIKRXJIHOh«X)STm points of 100% 


FT OUlDe to WORLD CURRBnetBS 

The FT Guido to World Cunendss 
table can be found on the Enraging 
Morttata page hi today's addon. 


York 


taqrB 

— One —• 

-Prwi (toss 

Eapot 

16930 

1-4985 

1 ralh 

1.4919 

1-4872 

3mm 

1.4012 

1.4858 

TK 

14910 

1-4926 



Open 

Sett price 

Changa 

high 

Low 

Eat wol 

Open tot. 

Jun 

95.15 

9560 

-114 

95.15 

6467 

69,717 

424,135 

Sep 

9464 

9461 

-062 

9464 

9460 

86614 

410.723 

Dec 

9465 

9361 

-064 

94X15 

9178 

77678 

346672 

■ US TREASURY BOLL Hfiures pMM) Sim per 10096 



Jim 

9565 

95.42 

-115 

9666 

95.41 

1.013 

25-433 

Sep 

95X71 

9462 

-060 

85.01 

9461 

656 

10,707 

Dec 

9462 

94.40 

-0X23 

9462 

9469 

696 

6605 


FT-ACTU ARIES WORLD INDICES 


JoMy compflad by The RrmcU Times Ltd, Goidntan. Sachs & Co. and NetWUt Securities Ltd. in conjunction with the Institute of Actuaries and the Faculty of Actuaries 
NATIONAL AMD 

REGIONAL MARKETS FfOOAY MAY 8 1994 THURSDAY MAY 5 1994 DOLLAR M3EX- 

Rguras to parentheses US %chg Pound Local Local % Groan US Round Local Y* 

ahow natter of has Dotar ataco StarOng Yen DM Currency chg trom Oh. Dotar Sterttog Yen DM Curency 52 week 52 week ago 

or stock raw 31/12/93 Wax Index Index tatat 31/12/03 Yield tadaw Indax Indax Indtat Index 


AI Open kaetsei flat, are tor pnntoua day 


BANK RETURN 


Hltfi Low (approx) 



tewtretapS) „ 

— 18269 

-2-3 

16167 

10560 

141.19 

15168 

-76 

162 

16188 

15860 

10483 

14108 

15227 

18116 

13210 

13784 


Aiubto (17) 

17464 

-14 

17363 

11365 

16163 

15169 

-66 

1XJ2 

17625 

17488 

11441 

15286 

152.69 

19141 

13983 

14286 


Btaglun (42) 

17122 

15 

172.13 

11264 

15104 

14155 

1.1 

173 

17382 

17167 

112.70 

16087 

14733 

17167 

141.02 

14114 

' ' ' 


- 129.04 

-ID 

12823 

8184 

111.77 

129.18 

-18 

281 

12177 

12785 

8159 

111.68 

12925 

145X31 

121.46 

127.79 



256,72 

36 

25110 

16179 

22266 

227.80 

-23 

195 

25194 

26480 

18176 

22283 

22111 

27179 

20788 

225.64 

" r 

Roland (22} _ 

14129 

212 

14865 

9669 

18961 

169.40 

111 

088 

14880 

147.19 

9146 

12887 

16179 

15172 

8584 

99.63 



_ 174.98 

-06 

17366 

11368 

15167 

15179 

-IB 

288 

17111 

17345 

11387 

15187 

157.03 

18137 

14980 

16186 



14160 

2.4 

142.70 

0360 

12469 

124.30 

-18 

186 

14337 

142.02 

9107 

124.34 

124X14 

147X17 

10789 

11387 



- 652.17 

-210 

34195 

22160 

30105 

34968 

-288 

104 

34117 

33962 

222.77 

29783 

340.40 

50686 

27142 

27465 

. . 

ktdand (14) 

18121 

10 

184.04 

12063 

tea. 43 

17963 

-11 

385 

1819& 

18424 

12174 

18131 

1B027 

20983 

15563 

160.76 


Italy (DO) 

9147 

362 

94,86 

fom 

8269 

114,10 

311 

184 

92X20 

91.33 

50.85 

7967 

iia73 

96 XQ 

5788 

7236 

. 

Japan (469) 

- 157.17 

206 

15118 

102.11 

13114 

102.11 

112 

179 

15101 

15155 

10162 

13444 

10062 

16561 

124J54 

14167 


Malaysia (98) _ „ 

471.68 

-213 

46189 

30143 

40156 

479.93 

-218 

1.42 

46786 

46154 

30178 

40588 

4808+ 

62183 

31281 

317.77 



192967 

-102 

191768 

125361 

187168 

806307 

-119 

0.72 

193132 

191383 

125171 

167466 

896107 

2647.08 

1431.17 

149160 


Neteriand ( 2 Q 

20160 

1-4 

20163 

131.17 

17469 

17142 

-13 

126 

20170 

19681 

13129 

17487 

17182 

207.43 

16130 

16967 



— 6460 

-46 

64.10 

*1.87 

5565 

69.48 

-76 

+81 

6145 

6285 

41.19 


5132 

7789 

4162 

4786 

•-J- • • 


19142 

7.7 

182.19 

125.66 

16763 

19178 

15 

1.75 

19480 

192.96 

12145 

16194 

191.46 

20642 

15061 

16121 



. .63866 

-76 

33143 

21968 

29326 

242.77 

-106 

185 

34101 

339.77 

22287 

29748 

24622 

37192 

23882 

24169 

raw 


——28464 

-18 

263X77 

172.13 

229.49 

27168 

15 

2X27 

25143 

25421 

18846 

22240 

26847 

26066 

17583 

197.74 



13067 

02 

138.78 

9174 

12068 

14138 

-16 

4.10 

13868 

13785 

9114 

12043 

144,35 

155.79 

11133 

131.06 


Sweden P8) . 

—22024 

112 

224.82 

14169 

19667 

25115 

15 

184 

9MJQ 

22113 

14120 

19100 


23202 

16385 

17124 


Ssrtoariand (48) — 

— 15366 

-36 

152.08 

9196 

13326 

135.09 

-14 

1.78 

15563 

154.06 

10196 

13468 

13179 

17886 

121.14 

12124 



19185 

-7.0 

18145 

12366 

165.14 

189.46 

-78 

361 

191. 7E 

18988 

124.11 

16181 

189.38 

214.08 

17082 

177.71 

, • . 

USA £19) 

IB2.45 

-19 

1D1X30 

11153 

1510? 

182.45 

-19 

263 

:8L&£ 

iB26S 

11947 

159.61 

18+XB 

19104 

1786S 

19297 




15 

1ti6.28 

U062 

146.& 

15181 

-Hi 

life 

,33£7 

167 JS7 

10988 

14180 

15688 

17888 

14186 

14784 



_21183 

12.7 

21229 

13179 

165. Of 

21128 

18 

182 

21172 

212.BE 

13988 

18122 

214,61 

22080 

15182 

16860 

• r - -'- r - ‘ - ■“ 



114 

16142 

10865 

14X.45 

111.52 

14 

1.08 

18121 

160.88 

10530 

14069 

10965 

16160 

134.79 

149 JM 

t < ■-* — 

Euio-Padfic 0474) .16664 

76 

16129 

10107 

1+4.08 

13141 

18 

185 

15580 

16344 

107.11 

141 iC 

12981 

170.78 

14168 

14110 



179.13 

-36 

178XJ0 

11668 

155.18 

17176 

-IB 

261 

18080 

17189 

11724 

15163 

18025 

192.73 

17167 

177.07 



15367 

46 

15260 

9967 

13128 

141.16 

-02 

229 

15381 

162.06 

9965 

13113 

141.02 

157.47 

12287 

127.85 



237X25 

-176 

235.75 

154.14 

20150 

215X17 

-19.1 

2.76 

234.17 

23160 

162X71 

20110 

21387 

29121 

181.48 

10280 


World Ex. US (1657) — 

107X30 

14 

16024 

10860 

14461 

13153 

18 

186 

16562 

16485 

107.71 

14360 

13244 

17281 

14284 

14882 

- ■■ 

World Ex. UK (1971) . 

16865 

3-4 

16138 

11069 

14177 

14464 

12 

SLOB 

16867 

18787 

1098S 

14155 

144.58 

17588 

153.22 

15161 



170.77 

26 

169.08 

11104 

147.91 

14769 

-17 

224 

17144 

16882 

11184 

14781 

14768 

17158 

15100 

15138 

... 

Wbrid Ex. Japan (1707) . 

1B062 

-36 

179.78 

11764 

15171 

17102 

-48 

286 

181.41 

1798S 

117.7B 

16783 

17687 

19120 

165.70 

187.12 


The Wbrid todax (2179 - 

17163 

26 

17025 

11161 

14140 

14863 

-16 

224 

17094 

16232 

11067 

14125 

141 BO 

17197 

155.17 

15147 


BANKING DEPARTMENT 

Wednesday 
Mey 4, 1994 

tocraaae or 
decneasfl for week 

LtabBUea 

E 

C 

Capital 

14 853 XXXI 


PUjIc deposits 

669811782 

-441482827 

Bankers deposits 

1803818847 

<295.181143 

Reserve and other accounts 

3.131.008371 

-241X171190 

Assets 

5818.696800 

-386872X274 

Qraremment secretes 

1XJ1 1851429 

-50 .905.000 

Advance and other eersounta 

1437861768 

+661 ,420X372 

Pienitae, oqulpcncnt and ottw aoca 

1,156.480831 

-990X186.063 

Notes 

12814850 

<2855869 

CUn 

180.422 

<22,448 

ISSUE DEPARTMENT 

5818896800 

-388872874 

LJbMUm 

Notes to draAotton 

17657.6S5.650 

+257,744.031 

Notes In Banktofl Deportment 

128*4860 

<2855668 

Assets 

17870 XXXLOOO 

+260,000800 

Qtwemment debt 

11.015.100 


Other Government secretes 

14X121287829 

<172891X282 

Other Secretes 

1935897871 

+67,101718 


17570XXXLOOO 


LONDON RECENT ISSUES: EQIimES 


<280X100.000 


and 9454 fraaft Nordte Pao 30, IflM - 1SUB (U8» Mt* M*M pemd Barintf md 12352 

s ending aWB* Mdtoon: We Daman penmwtL 


agar 


ngi 


STOCK INDICES 

-IKK- Stac 

Hay 6 Hay 5 Hkq 4 tag 3 Apt 29 Mflh lot. «bA 


May E May 5 Bay 4 Mv3Apr29 


- IBM — 

Htgh hw 


Shea 

H* 


Law 


FT-SE 100 
FNSE MS 250 
FT-SE 1H 250 88 If* 
FT-SErA 350 
FT-EE EcwriCip 
FT-SE StitoKip at ITa 
FT*SE4 AHhSB 


3105X1 31065 30765 310QX) 31255 3520X. 30705 S3U 9865 

37715 37705 37S77 37755 3781.1 <1525 37525 41B25 13744 

37*82 37H7J 37755 378L8 37979 41927 37727 41807 13723 

16795 1579.7 1564.7 1577S 15885 17783 1564J 17783 6845 

194253 194158 194296 194528 194395 20BUS 1674 J3 299458 138379 
191042 192151 192251 193352 1920X4 2D80.72 182559 290072 138379 
157145 1572.45 155BJ9 157195 158044 1764.11 ISS&aimil 6192 


145053 1440.10 144758 140055 148252 1540. IS 139060 1640.19 90145 
1465.18 1468.74 145856 1473X17 147109 16B7.M 144106 1607.10 93852 

24819 24814 24635 3464.1 26055 27135 2439 2 27135 494 

9080 0457 9498 05.16 9556 107X14 9359 12750 40.10 

11251 11256 11157 114X5 11452 13357 11251 13057 5153 

185050 17B058 1829.19 1851.75 139053 23675178252238750 922.16 
2025 1911 2075 2195 2175 2775 1855 7347 435 



SBUS 

tee 

P 

Ant 

paid 

ML 

cap 

BmJ 

1904 

tegft Law Stock 

Close, 

Price 

P 

V- 

Net 

dm. 

Ob. 

CUV. 

a* 

ha; 

net 

TOO 

FJ*. 

404 

102 

90 AMrust Mgfi fnc 

101 

-T 

- 

. 

- 

- 

- 

FJ>. 

1X34 

10 

9 Attest Scot Wits 

10 


- 

- 

— 

- 

- 

FJ 3 . 13217 £14* £14*9 AshanU Gold 

£14* 

+*S 

— 

— 

- 

- 

100 

FJ>, 

408 

114 

110 DBS Data & Res 

113 

+2 

LN2-8 

1.1 

n 

270 

- 

FJ>. 

128 

30 

26*2 Edfttgh. Inca Wta 

27 


- 

- 

- 

- 

160 

FJ>. 

61.1 

171 

160 GRTBus 

171 


RN38 

3X3 

ZB 

132 

_ 

FJ. 

1043 

483 

47B Govett Gtofare Snar 

479 


- 

— 

— 

- 

185 

FJ. 

42A 

196 

185 Hamtoys 

188*2 


Wd.7 

22 

12 

170 

180 

FJ. 

4178 

191 

17B House Of Frarer 

182 


UB0 

2 2 

14 

114 

- 

FJ. 

- 

95 

95 M Biotech 

95 


- 

- 

— 

- 

- 

FP. 

- 

30 

30 Da WrerantB 

30 


- 

- 

- 

- 

130 

FP. 

71 J 

138 

128 Kate 

128 

-4 WNQ4.7 

2X3 

3.7 

140 

155 

FP. 

838 

164 

152 Nottingham 

159 

-1 

■ISO 

10 

40 

150 

80 

FP. 

27.7 

87 

73 Oxford Moiecutor 

75 


- 

- 

- 

- 

200 

FP. 

71.1 

241 

218 PartCO 

241 


L135 

28 

20 

200 

160 

FP. 

210 

181 

160 Persona 

181 

+3 

LN304 

40 

2.7 

161 

- 

FP. 

503 

60 

53 Seam Hobranenc 

SB 

-1 

- 

- 

- 

- 

120 

FP. 

215 

133 

131 St Jame Bdi Hm 

131 


RN3.8 

1.7 

38 

112 

196 

FJ. 

128 

2SI 

IBS Superscape VR 

238 

-4 

- 

- 

- 

- 

100 

FJ. 

430 

90 

91 Templeton Lot Am 

93 

<1 

- 

- 

• 

* 

- 

FP, 

4J07 

50 

44 Do mu 

44 


- 

— 

- 

- 

- 

FP. 

1428 

104 

100 Tampireen Emfl C 

102 


- 

- 

- 

- 

100 

FP. 

613 

102 

06 Underrated Asia 

102 


- 

- 

- 

- 


FT GOLD MINES INDEX 



%d« 
May Moca 

6 31712/93 

May MB Era 

s R*> 

ftof 

GoU 

Mteaa 

amt ore 

yWdft 

52 WMfc 

1 tab LOR 

BDftfHkMtalKm 

183020 -17.1 

176088 4134 

100X0 

204 

236740 152206 

■ HfQtoaa ttataaa 

Africa D9 

2S2&7S -215 

247022 1209 

29X57 

4.78 

344000180100 

Aoreniadam 

217108 -115 

217407 500 

12.74 

118 


Nam Acnrici D1) 

1614X26 -113 

1527.10 2135 

B70B 

on 



Bren ua DoWta^Bmjjtotea 

ifim QWd ifwaa tata- ire a : m.a: wnakV rWinnn- - 1 M tMfcm TPW narc tgl.1 f B hML 


LOW COST • osV-944 0n' l 

SHARE DEALING SERVICE 1 1 


i ! I'OM till Ji.II.'t'.ML.'J 

f'/V O'- .’.'.'1 IRM.'l 


BASE LENDING RATES 


Adam £ Company .... &2B 

Med Trust Bar* _5J5 

AS Bank.. 556 

PHenyAntbaGhar ..._ 555 

BerfiolBarada 555 

Banco BBbao Vbcqt^. 525 

Btricut Cyprus— _SJS 

Barhef inland 556 

BankefMB 855 

BarttolSccriencI 656 


MBkofMUEaa — STS 
•Brown swptey SCO UdA25 
CL Bat* Nedertand .... &2B 

CKbOlftNA.... ,— 555 

OytteddeBank — „«B 
IhaOdcparerivaBankfiOS 

CoUtsfi Ob 65S 

QadtLyomala 659 

CjprmPcpJta Bank „5Jt3 


Duncan Lawria S5S 

BtaterBrnkUnted... 655 
FtencWl Gen Bank- G 
•RObetlFtomkigaCO. 825 

Girobank S2S 

•Quamen Mahon S 2 S 

HBbbB9rf(AG2)lfch.555 
•Hwitejefleti* „« 
Hartatfa&GbnirerBk.SXiS 

■HiSamud 529 

CHoataSCo STS 

Hcngtangl Shanghai. SJS 

Jidan Hodge Bartt S2S 

4fteOpcM Joaaph & Sera S2S 

Lloyds Bade 555 

Matfin4Ba*Ud B25 


•RotergheQuaiariBa 
Corporation Limted e no 


abenU^raibten. B 
Floyd Bk of SsoBand _ 525 
•SmOh S WBnsn Secs . S2S 
Standan Chartered _ EL25 

656 

•Untad Bk oTKiimI _ 555 
Unfcy TuN Bank Pte - S55 

Wonsom Trust .—555 

M*BMyLakfcir....S55 
Yohahke Barit 55S 

■ Members of British 
Merchant Banking & 
Securities Houses 


RIGHTS OFFERS 


Issue 

prita 

P 

Amount 

pokf 

up 

Latest 

Renun. 

date 

1994 

ffigh Low 

Stock 

Cto3tog 

Price 

P 

_ 

N1 


3pm 

Ipm 

Abtndt Scotland 

1*4Pm 

390 

W 

17/B 

79pm 

28pm 

Aktous 

76pm 

52 

AS 

2/B 

4*3pm 

1*jpm 

Atoort Rshar 

3pm 

6 

Ml 

IBIS 

1*2pm 

It pm 

ADad Radio 

*ajm 

£16 

Ni 

as 

390pm 

120 pm 

EK Bio-Tech Uta 

120 pm 

55 

NS 

_ 

16 pm 

Spm 

Date Beetle 

Spm 

EDO 

m 

26/S 

63pm 

88pm 

Darwant Vatay 

58pm 

9 

m 

27/B 

liian 

*<pm 

Em 

Vpm 

28 

M 

_ 

10 pm 

9pm 

GutonesPsaf 

9*2Pm 

192 

m 

ISA) 

27pm 

14pm 

Hintn Armiey 

14pm 

105 

M 

27 16 

B5pm 

18 pm 

LASMO 

43pm 

425 

W 

ZtlS 

67%tol 

54pm 

Mays 

87*apm 

26 

M 

— 

4pm 

iLpm 

Ramos 

a^pm 

2 

M 

24/S 

%l*n 

lipm 

Trenarit 

lipm 

24 

M 

- 

11 pm 

11 pm 

Unit 

11 pm 

330 

M 

Bfl 

43pm 

29pm 

vmm Hdgs 

32pm 


Money Market 
Trust Funds 


Ena m ata MDr 

CAP Moan Managutstf Co LSI 

« hnxur And. Irnruga 1 M UD 073T 770114 
CmmOiiwiRm — I «.?! -1 <.ra| 3 -IHI 

DwoiaOMrliemwi 4di *.eo 3-m 

Dapsoit} Ont C 2 nakn I u> -I MHla-Mi 

The CflIF Charitka Etepoak Accsunt 
W5« 


2 Fare Staet. Lowkn tCST 


07t-Saa HIS 
-I iuImm 


DariL BtL o( Re. ofChDrch of Englandt 

z F<n strata LMdon ECzr saa ” • 


Dqxsa I <35, 


ISIS 

- 1 UmImwi 


Rum & Co 

«a sou ims noun w-mm 

Crem Crewreta tanad IW riWsrerev 

IStaWrtaratalretaofEWWU UTWaWM 

ntMamgwwMiniw-l AMO - 1 -I - 
Das I . 

lOAnart Cut. Unren HSU t 

tro ooe- I 171 

muxh-co.au | *js s.ie 

szsaxiiiMW . — 173 ZJI 
SerinvACMuri 1 175 W» 

Dmtters Tst Pte-Bavenbsa 500 Acc 

SSIAWnEI. WMWlWlDtaH 0 HI-S 3 Z 9 *** 

nojxo. awm ix 3 s<sn | - t* 

Cl 0 . 000 * I Vera MO 1815 Ji Sta 

ntaf*MtobH 2 rel axn run l 


os 

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ILtO.1 

toman sum, iiEOBri 
'in zai 

. «.» atari 

CHUMKaun.. I uk I «ol 


n-c«a.9w. 


aaa 


Money Market 
Bank Accounts 


■torpi 


BtaOlB- lira s l* *i «1 ton gn raarel 

Asset Resonre Own Ace 

HK12HG OCtSDSK 


EMUUD and otora 

aioaa»[418aa — 

nuueCMn 

cuuHsram 


5 no 4X0 
SJS 3.94 
4W> ua 
45 IIP 


S.72 


U OM HCr 


a Huma Baakpk: 

r Roao. UradM EC1Y2 


rsunareaibaw — 

CWBniDr«LBW_ 
nUD00K>£Z<399 - 
cunoB areas 


55 

4» 

410 

45 


184 M3 

ua 4JH 

3JB 4JSB 
SIS 43Z 


4JS0 1 BOB 
<31 | MB 
<31 1 MO 


Allied Trio* Bank Ltd 
5 i tn i npBi m. uMai k« an 
maMiraon-t — 
ran* re ooi*i . 

roaHA j .’.ooi-i 

OMCAl -I 

mcczjioi *■ 

raoC*p _ -noi -i . __ 

Framer TESSA 


071-520 0070 


ore 

ISO 

tUM 

&JH 

<30 

5 as 

58* 

<3 

Ubi 


IBB 


<00 

uo 

&Q7 

400 

500 

ior 


S 15 

oar 


Jiten Hodge Bank Ltd 

» mb raw if Oran ta; I son 
JttaHMtoataa««B| sn 
iwuuiwmI on 

Kmterefide Ffnaace Graop 

safer way, rtf, mait pit i 05071 

ISOXKO- I 55 IMl sail 

Leopold Joseph &Sona Unted 
5 brasturi straw. UmdanCCSVIU on-soa 
WT Wok taw taw fw re 

tzsan -naroM |uo saooo gJTDoj 


BOO-C9MW-. 




ciAoo-rewaBS 

550 

ua 

558 


in 

sat 

303 


400 

500 

*JW 



110 


CSCUJOO- 

4 75 

550 

<05 


Bank of Ireiaad Wta bdaroat Cheqm Acc 

H-aoMahtaSKanCTi ta 0733511 


Tmer tioOail tan I * 7S 4 MOO I 

Wdnwcrt Benson Ltd 

“* laiirak l—» n uraoan aws JST 071-207 me 
Y( ~J HJCA.iE2sae*i. 1 1.1 non 1 <33 1 crei 

Klefnwart Benson Prhmta Bank 
h«ct 44— an Ponai Urn ere uregreai M l 
S444 rUteesn Iren taM. lawn MH 51 071-57 ISM 

KLCA.iT3.MXM I 45 11079 I 43ll DaS| 

IS Uayds Bank - laiajbuuat Attauwl 

71 LiMaM St. Lnarei ECV 3SS 0277 433373 

nooanudreoH _.| 55 im[ 

tsosoo. 519 

SSdWD* 4B5 

ciaooe* I ATS 


30-40 Moll St sungn 

noeoa*— 1 isoo zxn I is4e| an 

1375 I Dti 


aoao-aren 1 iu 


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US colic r will soar; dcflcllcn will continue; gold a most comrrscc.ties 
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" OT -'c'dd ICqi ,n Fu-'loMoncy - the Iconoclsjlrs Inveslmcn! (elfer. 


; issue (cnee oniyjci C^-ert Are y::i L‘s. 
'"HO. XK Tti; L07crc 7i.i’9d567 
■Fc> 71-i3ViVil C |,y.:iv 


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A * w ACCUftATC “K*” tc™* foubon exchahgs porecastmq 

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jiilfljljj 


FINANCIAL TIMES MONDAY MAY 9 1994 


LONDON SHARE SERVICE 


DM DU tab tat 5 
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dSepHay fJ - 
07 AIM 8.12 - 

2.1 ibyQH 143 SHI 
17 0dB*T a a* tw 

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iiOd MT 143 TO4 
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13 Dee Jan 47 

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* Mm Jw 143 ztjb 
11 Oct Hay 141 8171 
Z3 Junfee ir92 

129 JuaOic 1192 
65 Jod DK 1792 - 

1.7 JdA*i U 

11 MU 242 8483 
IB HM IIS 

IJ3 1 112 3S74 

34 0tcJOTl?92 
17JnDoc1732 - 

12 An Oct 143 4094 

- fa- 142 1719 
8JAM0M17O - 

13 JOCK 1732 - 

U AprOd 142 4320 
ZB Jr fee 12*92 

22 Jr Dae 306 
A Jan 24 Zi.12 - 

22 Aai Dae 1292 


WW DM 

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280 -.4 SS) 

174 -1.7 438 
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804. 43 MO 

438 722 

420 52S 

407 1228 

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LONDON SHARE SERVICE 


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BE OUR 
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of the 


FINANCIAL TIMES 



FINANCIAL TIMES MONDAY MAY 9 199^ 


NEW YORK STOCK 


COMPOSITE PRICES 


TO. H 91) 

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FIN/VNCXAL TIMES MONDAY MAY 9 1994 


4 pm ckas Mays 


NYSE COMPOSITE PRICES 


37 


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55% 42%SraraR 180 14 7 9141 48% 47% 47% -1% 

13% 11% Stags Set 184 70 29 12 12 12 

39% SBSmmntax 022 17 33 380 33 32% 32% 

39% Z7% SflQuuA 080 10 5 12 31% 30% 30% 

40% ZBSwpaS ISO 10 16 37 31% 31 31% 

a 22% SenCp 142 1.7 18 1754 24% 24 24 

28% 22 State 092 37 13 349 25% 24% 24% 

25 17% Shaw tad* 122 10 25 1281 21 
24 18% fenannuNt 180 16 20 5022 
14% 11% SbetylMy 128 28 26 2 

66% 58% Staff!! 307 4.7 20 726 

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106 10 13 88 3% 3% 3% 

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153 20 12 126 18% 18% 18% 

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21% 17% Aydar 01 124 10 26 783 20% 18% 20% 

30 645 28% 28% 28% 

108 17 B 1727 29% 28% 28% 

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188 15 8 238 19% 18% T9% 
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38% 28%S«Td 
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38% 32% Sprint 
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112 10158 1146 9% 9% 9% 

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156 20 17 29 29 28% 28% 

100 20 20 1*1 34% 34% 34% 

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38 235 27% 27% 27% -% 
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200 70 2 34% 34% 34% 

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104 1.7 23 2066 61% 60% 60% 

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068 10 20 2010 X 34% 35% 

168 20 93 199 M% 34% 34% 

110 00 51 1901 29% 28% 29% 

26 2486 3% 3% 3% 

120 15 35 178 5% 5% 5% 

112 1.7 a 7 8% 8% 

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170 15 18 6 19% 19% 19% 

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110 1.1 4 212 8% 8% 8% 

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158 22 15 208 24% 

110 18 17 25 15% 

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000 20 21 8741 28 27 27% 

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AMEX COMPOSITE PRICES 


4 p/ndoseUayS 



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BadperMr 006 16 
BtaftmTA OM 33 
BaoiRG 18 
BAT tad 079 12 
Baaid 6 

BttsMsi 140158 
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140 35^2 35 35% 

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COcPB 104 28 207 

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Stack Hr. E IDO* Ago UmrCtaf* Cbag 
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164 12 15 
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152 70 19Q 

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32927 5% __ 

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125 90 6% 


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M Sta 
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185 

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OdedctA 
Natan 

Pegasus G 040 963078 17 



GET YOUR FT DELIVERED TO YOUR HOME OR 
OFFICE IN THE GRAND DUCHY OF LUXEMBOURG. 

A sul«eription hand delivery is available in the whole of the Grand Duchy of Luxembourg. 

We will deliver your doily copy of the FT to your home or to your office at no extra charge to you. 

If you would like more information about subscribing please call Philippe de Norman 
on tel: (322) 513.28.16 or fax your requirement to (322) 51 1.04.72. 







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117 30 235 31% 31% 31% -% 

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CQcaCatfi 100 IS 193 27d25% 25% -1% 

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Gaff CD 118162 38 8% 6% 6% 

Got Bind 00017 51u17% 18% 18% -% 
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GamaxCp 400 481908 29 27 2B% -% 

ten he 137 103 4% 4% 4% -% 

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Gtoaona 040 11 387 19% 18% 19% +ft 

add h gl 112 17 2206 23% 22% 22% -% 

GSwIA ISO 18 15 17% 16% 18% -% 

SribBtam 11 37 5% 5% 5% -% 

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BMfosPmp 050 193899 21% 21% 21% -% 

GradeoQs 32 1 09 2 1% 1JJ -ft 

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Green AP 024 10x100 17% 17% 17% -% 

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106 14 26 33 32% 33 4% 

MapraPta 14 575 32 31% 32 +% 

Magna dp 076 12 4Z5 1B% 1B% 18% -% 


Man Bn 14 143 9% 9% 9% 

Marcare Cp 27 214 10% 9% S% 

Marine Dr 131064 5% 4% 5% 

UartreiGp 9 45 41% 40% 40% 

IfexquH 8 2 1% 1% 1% 

Mamma ia tos 6% 8*2 8% 

ManbSmkA 144 10 37 10% 10% 10% 

180 11 482 20% 20% 20% 

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Maxtor Cp 02267 8% 6 6% -% 

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MeCanC 45 5013 50 49% 49ft -I i 

Med Imag 0 916 ft dft ft -% 

Medaxhc HB 17 393 I4%di3% 13% -1% 
MteteS 008 13 97 23% 23 23 -% 
Metsnhs 024 7 28 5% 5 5% 

Merrier Cp (L16 4B 107 14% 13% 14 

MmtG 024 23 2740 11% 11% 11% 
MereantB 088 ID 247 19% 19% 19% 
Monty £ 170 7 853 2B% 28% 27 

Iteulan 136 II 965 30% 30 30ft 
Hanaei 17 1472 18 17% 17, | 

IMhodaA 006 IS 292 15% 14% 19% 
Mted F 020 15 694 10% 10>2 10*2 
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HteTray 8 481 14 13% 13% 

HbMx 072 14 689 21% 21% 21, i 
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3418980 29% 26% 28 ft 
27 73 11% 11 11% 

20 142 4% 4 4% ■% 

124 1138616 99% 56 59)) +% 

11 148 3% 02% 2% -% 
132 352825 20% 19% 20*2 -% 

21 175 10% 9% 8% •% 
124 18 386 1 3% 13% 13% 4% 

-% 
% 
-a 


9% 9% 9% 
8 368 7 6% 6% 

231 101 12 11% lift 

29210 11% 11 II 


- N - 

MAC Re 116 131749 30% 29 30% +% 
MariiFncb 172 11 29 17 16% 17 +% 

NatHzza 13 81 5% 05 5% 

NatCompt 136 88 10 11% 11 11 

MmSim 130 23 11 15% 15 15% ■+% 

Marigte 10 310 20 18% 18% *% 

HEC 146 95 23 55% 55*4 55% ■+% 
NeffCV 17 2059 28*2 27% 29 +% 

Net** Gen 252381 18% 17% 17% -% 

HethfcS 84 1438 6% 6% 8% 

25 3 7% 7% 7% 

127 17 0S7 17% 17 17% -% 

MewEBos 180 22 401 21% 19% 19% -1 

Nowknage 7 320 9% 9 9% 

MadgeM 391GB51 53 48% 52% +1% 

Newpri Cp 004 12 55 5% 5% 5% 

NotfoM 20 2304 B% dB% 6% ft 

Hantaan 156 26 63 58*2 57% 57% -% 

HdSkia 034 24 5419 41% 41% 41% -% 

Haotan I 12 85 1G** 16 16% ft 

HSUrUn 4H0O 5% 5% 5% +% 

NorthnTd 088 13 397 41% 40% 40% 

NWAb 2340 IB 15% 15% -% 

Nurel 21127675 19% 18% 19 

NOMriua 2B2B35 32% 29% 31% +% 

HSCDxp 9 3 3% 3% 3% 


-R« 

Rtexm 13 193 15 014 14% 

fOB/S 8 562 6 5% 6 

F mtu ii HB 4 4ZZ 5% 5% 5% 

Kqmortl 25 92 19*4 16% (9 

Rtataon 28 364 31% 30% 30% 

HritoA IS 11 19 18% 19 

Ret* Sen 3 352 5% 4% 4% 

Rep Waste 4 352 3% 3% 3ft 

Resrctfno IS 34 9*4 >% 9% 

Reuter* £24 15 2580 43 % 42% 42% 

team he i 305 6% 6 6% 

Rita Fit 006 10 86 35% 34% 34% 

Routes 1.40 22 1424 68% 57% 67% 

Rttagnt at2 14 55 7 6% 6% 

Rocf&Sk 156 4 557 17% 16% 17 

Roasran 044 9 334 47% 46% 47 

RassStr 120 11 2065 15% 14% 14% 

MectMad 24 306 19% 19*4 19% 

Rouse 068 72 1094 19% 19 19% 

WMInc. 0L52 20 833 18% 17% 18 

RSRnx 148 1? -100 20> 4 20*4 20% 

RyanFmly 13 467 7% 07% 7% 


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SondErsm x030 13 38 17% 17 17% 

SdfndpA xQ30 17 227 ?4% 23 23% 


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SaffWd 1^0 48 23 38% 37% 37% 

S'gata 1120009 26 25% 25% 

SB Cp 112 27 7 21%d21% 21% 

SeawtsB 036 1 179 1% 1% 1‘j 

Setocdns 1.12 15 297 26% 25% 25% 

Sequent 64 1166 13% 13% 13% 

Sequob 31 1Z2 4|j 4}J 4fl 

Sen Tech 13 165 ftl 2 9% 9% 
Serrfract 22 23 4 % 4% 4% 

Sevenson 16 17 17% 17% 17% 
Stalled 004 18 479 24% 24% Ntf ft 
SHLSystm 2 183 6% 6% 6% -.11 
Snoremooa 23 28 14% 14% 14% 

ShawUr P 9 490 10% dIO 10% 

Stem On 201161 25% 24% 25% 
StaraTTK 2 82 3% 3% 3% 

SigaiAl 133 21 1805 49 45% 45% 

SigmsOc 1 730 8% 8% 8% 
SOcrNBc 006 51 266 10% 10% 10% 
SSaffip 29 1022 10% 10% 10% 
Smpsan 156 25 19 20% 20% 20% 
Srtefld 34 1078 25 24 24% 

SnapptaB* BS 7864 25 24% 24% 

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9B 21% 21 21% +% 

94 1 7% 17 17 -% 


- o - 

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Octal Com 16 4241 20% 19% 20% 
OIMnLa 14 1968 14 13% 14 

OgtabayH 080 B 8 25 25 25 

OtfoCi 106 61507 30% d28 30 

Odtent 1.16 10 860 U34 33% 34 

OUttriB 002 16 32 38% d38 36 

Onbancop 100 7 126 30% 29% 30% 

One Price 14 492 18% 18% 18% 

OpfealR 19 54 20% 2D 20% 

OradeS 4321618 30% 28 29% 

Ora Sara 55 2287 22 21 21% 

Orbatadi 198 25 64 8 8 9 

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23 358 55% 53% 55 


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IK Total 

418 

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95 667 11% 11% 11% 

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101 18 

054 28% 27% 

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19 890 44% 43% 44% 

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tomaoaCh 

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konudh 

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130 38 

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113 20 zlOO 

83 83 

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110 16 

79 12 11% 11% 

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120 

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21 24% 23% 24% 


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PredOpa 


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024 47 924 38% 37% 37% -1% 
PbveoAm 25 II 10 9l 2 10 
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PwnTrty 9 4 14% 14% 14% -% 

hsmlfcg 100 22 117 32% 31% 31% -% 

Peixoyh. £20 17 16 30% 30 30% 

072 15 352 34% 34% 34% ft 

Perfect) 1 16 S2 6% 6% 6% 

Pawed L 020 22 53 19% 18% 19% ft 

PHpBfK 136 16 360 53% 52% 53 -% 

PeoplesHx 124 12 1B88 12% 11% 12% -% 
PeanRa 1.12 18 run 33% 33% 33% 

Pharma^ 21 347 7 606 7 

Plmamrch 28 M2 5*2 5% 5% +% 

PtaaflH 008 4 50 11% 11% 11% -% 

Pktunta 28 1087 13% 13% 13% -% 

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058 24 1441 
114 IS 1519 
5 22 
16 32 
109 3 227 


X 35 35 -1% 


27 26% 26% 

8% 6% 6% ft 

7 6% 5% -*a 

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88 710 23% 22% 23% +% 

» 6058 15% 14% 14% -% 

41 69 5% 5% 5% -% 

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124 23 70 26% 26% 26% -*4 


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Stem 149 7100 21 21 21 *% 

StnmtxD 1.10 13 139 20% 20*4 20% +% 
StmcUDy 234445 11%d10% 11% -% 
Stryker 026 21 710 27 26% 26% -% 

SHiranD 21 124 14% 14 14 

tetemoB 000 25 9 22% 22 22 

Sum* Be 184 14 300 22% 21% 21% -% 
Samoa Te 432301 25 23% 24% +t 

S«*i Sport 16 M 6% 6% B% 

Sail*: 12 9910 22% 21% 22 ft 

SwfflTiH 28 114 2B 27% 27% -% 

Sybase he 6113229 53*4 51% 52% -% 

Symenuc 41 1675 15% 15 15% -% 

SynMoy 138 18 52 16% 17% 16% ft 

Sjnercom 72 32 3% 3*2 3% ft 

Syneniea 2 919 9% 9*2 9% -ft 

Syne* 46 103 11% 11 11% ft 

Synoptics 186096 20% 20 20*2 -% 
SyamSan 112 16 615 16% 15% 16 -% 

SystemSco 30 1924 1 9% 18% 16% -1 

Syatemed 191228 5% 5% 5ft ft 


- T - 

T-CeffSc 81083 4% 4% 4% 
Tjdwb Pr 152 17 443 29 18% 28% -% 

TBCCp 17 469 12% t2% 12% ft 

TCACabta 144 25 869 22 21% 21% -% 

TecidMa 12 1073 19 18% IS -% 

Tecmueh 180 IS X 59 58% 56 -% 

TftteMC 2 91 10 9 9 -% 

TehxiSys 7 618 13% 12% 13% 

TStaCramA 18817432 21 2ft 20% ft 

TeMM 15 439 10% 9% lift ft 

Teasta 47 3717 65% 61% 65% ft 

Teton Cp 101 17 2926 17% 16% 17 

Terra Tbc 71 658 uB% 6% aft ft 

TwtfMDR 127 2410734 25 23% 23% -ijj 

HIM com 4T12624 59% 57% 59 ft 
TJM 122 37 360 :4% 24 24% -% 

Tokos Med 2 287 3% 3% 3% ft 

Tokyo Iter 037 37 206 62% 62% 62% +1% 

Tom Brawn 
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100 11 220 38% 38% 38% 

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61 488 10% 9% 9% 

TruacoBKC 100 10 20C 20 19% 18% 

Tseng Lab 020 14 2177 8% 7% 8 


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213 39% 

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medi 74 663 

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ft 




FINANCIAL TIMES MONDAY MAY 9 1994 


38 


FT GUIDE TO THE W E E K 



MONDAY 

Swedes and Finns sign up 

Sweden and 
Finland will 
today break 
with a long 
Cold War tradi- 
tion of neutral- 
ity when they 
sign up for 
Nato’s Partner- 
ship for Peace 
at a formal 
ceremony in 
Brussels. Both 
countries plan to offer training in areas 
like peacekeeping, but they stress that 
they are not seeking full membership 
of the alliance. 

Mandela takes the helm: South 
Africa's multiracial National Assembly 
is scheduled to sit for the first time 
in Cape Town. It is expected formally 
to elect Nelson Mandela as president. 
Dignitaries will then decamp to Pre- 
toria, where Mandela is to be sworn 
in as president at an inauguration 
ceremony on Tuesday. 

US Wee- president AJ Gore, 
accompanied by First Lady Hillary 
Clinton, arrives in South Africa to 
attend tomorrow's swearing-in of Nel- 
son Mandela. Vice-President Gore trav- 
els on to Namibia, while Mrs Clinton 
returns to the US. 

Bank of Africa: The African 
Development Bank starts its 30th anni- 
versary celebrations in Nairobi (to 
May 3) with a fundamental shake-up 
in the offing. The deteriorating rela- 
tions between the president. Babacar 
Nthaye, and the board of governors 
win be discussed, as win a critical 
report on the performance of the bank's 
projects, which have not been doing 
well. 

t .parting member countries say they 
are holding back the replenishment 
of the bank's soft-loan fond. The AfDB 
is one of Africa's biggest sources of 
development finance, with a disbursed 
loan portfolio of more than $7bn. 

West goes east: At a Western 
European Union meeting in Luxem- 
bourg, steps will be taken to consoli- 
date the nine-member group’s status 
as a defence association. Nine former 
Eastern bloc states will become associ- 
ate partners, and Turkey, Norway 
and Iceland will be drawn closer into 
the group's embryonic military plan- 
ning activities. 

(IK education: Sir Ron Dealing, 
chairman of the Schools Curriculum 
and Assessment Authority, will outline 
his proposals for simplifying the 
national curriculum in England and 
Wales. He will suggest which subjects 
and topics should no longer be compul- 
sory. After a period of consultation, 
the changes should be ready for the 
school year beginning September 1995. 

Holidays: Russia and other members 
of the Commonwealth of Independent 
States (Victory Day). 


TUESDAY 


Hata in the Hons 1 den 

Tsutomu Hata, Japan's prime minister, 
enters the lions’ den when he delivers 
his first policy speech to parliament, 
setting the tone for what is expected 
to be a short-lived administration. 

Crimea’s pro-Russian parliament 
debates whether to hold a referendum 
in June on secession from Ukraine. 

Australian budgets Ralph Willis, 
the treasurer, will unveil Australia’s 
1994/95 budget. In the light of last 
week’s A$6L5bn (S4.6bn) jobs package, 
attention will foam on the federal gov- 
ernment’s growth assumptions and 
its revenue-raising p lans — i ncluding 
the timing of asset sales and privatisa- 
tion moves. 

Gold Fields Mineral Services publishes 
its annual survey of the gold market 
Traders will scan it eagerly for a price 
forecast - something not always 
included GFMS, which Is financially 
backed by two big producers, last year 
suggested that gold would range 
between US$370 and $400 a troy ounce, 
which turned out to be remarkably 
accurate. 

Tilting at chessmen: 

The Verenigde 
Spaarbank 
chess tourna- 
ment is played 
in Amsterdam 
until 18 May. 
Short won this 

annual invita- 
tion for the 
world’s top 
grandmasters 
in 1991, 1992 and 1993, but now faces 
Kasparov. Other entrants are Timman 
(Netherlands) and Ivanchuk (Ukraine). 
Karpov has refused to play. 

Venture seminar: The British 
Venture Capital Association and the 
inland Revenue sponsor a one-day 
se minar at London's Queen Elizabeth 
n Conference Centre on how to struc- 
ture venture capital investment trusts. 
The trusts, proposed in last November’s 
UK budget, will allow private investors 
tax-free dividends and capital gain* 
for investments up to £100,000. But 
some venture capitalists say the gov- 
ernment needs to make the terms more 
attractive or the trusts will fail to 
attract investors and sponsors. 

Saleroom; fn New York tonight, 
Christie's is selling some of the most 
important Impressionist and modern 
paintings to appear on the market 
since the price collapse of 1990. A group 
from the collection of Meshulam Riklis, 
a US businessman, includes a pictur- 
esque Monet of his stepdaughters on 
a boat estimated at up to $7m, and 
a Modigliani portrait with a $6m tag. 
From another private collection comes 
a Gauguin landscape of Pont-Aven, 
also expected to make $7m. If the sale 
goes well, the art market recovery 
will have been confirmed. 

Holidays: South Africa. 




WEDNESDAY 


Yeltsin visits Germany 

Russia’s 
President Boris 
Yeltsin (left) 
arrives for 
an o f ficial visit 
to Germany 
(to May 13). 
Among the 
items on the 
agenda wifi 
be the question 
of appropriate 
ceremonials 
for the departure of Russian troops 
from Berlin in the summer. 

Ukraine’s President Leonid Kravchuk 
is expected to ask parliament to post- 
pone the June presidential elections. 
Although Mr Kravchuk has registered 
as a candidate, he fears a “vacuum 
of power” in the country if elections 
are held before the parliament - 
recently elected and politically divided 
- is well-established and a post-Soviet 
constitution passed. 

UK economy: Attention will be 
focused on the pace of recovery again 
with the release of March’s output 
data. Analysts predict the figures will 
show that the corporate recovery is 
still in reasonable shape, though con- 
tinuing at a more moderate rate. 

Manufacturing figures are expected 
to show a 2.4 per cent year-on-year 
increase and a 0.2 per cent month-on- 
mtmrtr rise - down from 0. 8 per cent 
in February. Industrial production 
is expected to show a 0.2 per cent rise, 
down from 0JB per cent in February. 

Saleroom: Sotheby’s sale of 
Impressionist and modem art in New 
York tonight includes a painting by 
Mondrian from the collection of former 
CIA deputy director H. Gates Lloyd. 

He bought it from the artist in 1942. 

It should make in excess of $3m. 
Among the lots is ‘A bather drying 
her legs’ (below) by Degas, estimated 
between $500,000 and $700,000. 



HolMays: Sweden (Eve of Ascension). 


THURSDAY 

Japan’s bonsai government 

Tsutomu Hata, Japan’s prime minister, 
is due to take parliamentary questions 
on Tuesday's policy speech today and 
tomorrow. His opponents intend to 
give him a grilling. They are deter- 
mined to vote his minority government 
out of power soon after the budget 
for this year is passed, probably in 
June. 

The Social Democratic Party, which 
recently walked out of the coalition 
over an attempt to squeeze it out of 
policy making, will seize on last week's 
debacle, when Mr Hata’s justice min i s - 
ter had to resign after saying that one 
of the worst Japanese atrocities of 
the second world war never happened. 

Mex-TV: In the first televised 
presidential debate in Mexican political 
history, the ruling Institutional Revolu- 
tionary Party candidate, Ernesto 
Zedillo, takes on Cuauhtemoc C&rdenas 
of the Party of the Democratic Revolu- 
tion from the left and Diego Fernandez 
de CevaHos from the National Action 
Party from the right 

Thr Silver Institute, a 

producer-backed organisation based 
in Washington, releases its annual 
survey of the world silver market 
It is likely to suggest that silver 
demand outpaced supply by as much 
as 250m troy ounces in 1993, the fourth 
successive year that the market was 
in rtgflriL This has been possible 
because consumers have been able 
to dig into the huge stocks that have 
been depressing prices for many years- 

Cannes film festival; 

The 47th 

Harm pc Rim 

festival gets 
underway, 
though this 
year it may 
be more of 
a coterie spree 
on the Cote 
d'Azur (to May 
23). Hollywood 
is keeping its 
big films away, 
in reported annoyance at flag-waving 
French protectionism during GatL 
In rnnipensatinn , there are many fresh 
names from countries which have less 
developed movie industries, including 
Para, Tunisia, Taiwan, Mexico and 
Romania - and a nation some think 
qualifies for its own place on a third- 
world movie map. Great Britain. 

Norway’s prims minister, &o 

Harlem Brundtland, is to receive the 
Charlemagne Prize at a ceremony in 
Aachen in recognition of her efforts 
for social justice and the enhancement 
of European cooperation. She is the 
second Scandinavian and the second 
woman to he awarded the honour. 

Holidays: Austria, Belgium, Denmark, 
Finland, France, Germany, Indonesia, 
Luxembourg, Netherlands, Norway, 
South Africa, Sweden (Ascension Day); 
India (Bombay only). 




Nelson Mandela becomes South Africa's president this week 


(JtolMM fcflHfcntf 


FRIDAY 

■Major rallies Scots Tories 

John Major, UK prime minis ter and 
Conservative party leader, addresses 
the annual Scottish Conservative party 
conference in his first big political 
engagement since the party’s disas- 
trous performance in local government 
elections last week. 

Major will try to rally the faithful 
for the European parliament elections 
on June 9, keenly aware that another 
catastrophic defeat could end his pre- 
miership. He will also want to put 
fresh heart into the demoralised Scot- 
tish Tories, who fared even wane in 
the local elections than their RngHah 
and Welsh colleagues. 

Qronacflan embassy: The US 

Congress must decide by today whether 
to overrule a State Department plan 
to close the US embassy on Grenada. 
President Reagan sent 7,000 troops 
to oust a leftwing government on the 
Caribbean island in October 1983. 

In the ascendant The organisers 
of a conference on Astrology and the 
Stock Market, which starts in New 
York today, have chosen an auspicious 
date on which to begin it (to May 15). 

Holidays: Belgium. 


14-15 


WEEKEND 

Blackpool’s tower of gold 

Blackpool Tower, landmark of the 
seaside resort in north-west England, 
celebrates its centenary of opening 
to the public on Saturday. The local 
council has painted the tower gold 
to marie the event 

The FA cup final, highlight of the 
Eng lish soccer season, pits Chelsea 
against Manchester United at the Wem- 
bley stadium in London on Saturday. 

Revote In Togo: Ballots are repeated 
on Sunday in three constituencies 
where the Supreme Court annulled 
the results of February's election. 

Unison, the result of three UK public 
sector unions combining last July, 
convenes In Bournemouth on Sunday 
for its first annual conference. It has 
ousted the TGWU as Britain's biggest 
mmn. Confronting the government's 
pay bill freeze will dominate the 
agenda, but the meeting may find itself 
diverted by teething problems associ- 
ated with the merger. 

Monaco Grand Prbc The Formula 
One season continues on Sunday after 
two drivers died in separate accidents 
at Imola two weeks ago. 






ECONOMIC DIARY i 





Other economic news 




Statistics to be released tMs week 



Monday: Japan's monthly 
trade balance figures will be 
watched with interest on the 

Day 

nateoaw! 

Country 

Economic 

Median 

Forecast 

Ptnifapa 

Actual 

nay 

flalaaeart country 

Economic 

flumeHu 

Medan 

FOltiCIf t 

PMVfoUB 

Actual, 

Mon 

Japan 

April trade balance, first 20 days 

- 

37-2bn 

Thur US 

April Atlanta Fed Index 

- 

352 • • 

currency markets in the light 
of the recent strengthening of 
the yen. Analysts expect 

May 9 

Japan 

Mar currant a/c - IMF 

$19.7bn 

S11.9bn 

■ May 12 US 

April monthly Ml 

-$1-3bn - 

sa«» 


Japan 

Mar trade balance- IMF 

- 

$123bn - 

(cart} US 

April monthly M2 

S9bn ’ 

:‘«l&4bn • 

another substantial surplus, 
several billion higher than the 
Yl£9bn recorded last month. 


Japan 

Mar foreign bond Investment 

- 

-SMton 

US 

April monthly M3 

SlOShn 

$BMn\ 


UK 

Mar consumer credit 

£325m • 

£277m 

UK 

Feb visible trade, global 

-Cl.lbn 

-EOSE&n. • 

Tuesday: The Bank of 
England's quarterly report is 
expected to underline the UK 


Canada 

April housteg starts - unfta 

166,000- 

. 142,000 

AmsUb 

April unemployment ride 



Tuea 

US 

Johnson Redbook, w/e May 7 

- 

-0296 

Fri ■ US • 

April consumer prices Index 

03% 

0.396 ■ 

central bank's cautious stance. 
Analysts will be looking for 
any hint of a move away from 

May (O 

Canada 

Mar department store safes" 

1296 

8.9% 

'May 13 US 

- DKto. exc food and energy 

• as% • 

03% 


Noway 

April consumer prices index* 

02% 

0.5% 

US 

Mar business iiwmtoriaa 

o?% • 

.. ojB% • 

its recent interest rate cuts. 

Wed 

France 

Feb industrial prod, seas/adj* 

0.5% 

■02% 

■ US 

April earning* 

• ->-* ; •- • 

• 03% 

figures for February are expec- 

May 11 

France 

Feb manufacturing prod, aeaa/hdg* 

0£% 

1.296 

US 

April bank, credft . 

-■ 

•104%' 

ted to provide evidence of a 
slight recovery in the corpo- 
rate sector. Industrial produc- 


France 

Apr consumer prices index, praton** 1.694 

1.3% 

Spate 

April consumer prices Index* 

0596 . • - 

0-3% 


UK 

Mar manufacturing output* 

0396 

om 

Sp*i 

April cooitwier-|tec»s--lnd»^ 

-43%' 

5% 

tion is expected to show mod- 
est growth of 0.6 per cent, after 
falling by OH per cent in Janu- 


UK 

Mar manufacturing outpot** 

2.496 

1.796 






UK 

Mar Industrial production' 

0.296 

08% 

During Ms weak..: 




ary. Manufacturing is also 
expected to show 0.6 per cent 
growth. 


NTanda 

Aprf consumer prices Index** 

2J9% 

Z9% 

Germany 

April cost of fates, OraT 

- 

02% 

Thurs 

US 

AprS retea sales 

03% 

0.4 % 

Germany 

■ AprtGaetqfft*^,flnar 


32%. 

Thursday: A spate of US data 
will again focus attention on 
the US recovery, against a 
background of market concern 
about US interest rate and 
exchange rate policy. PP1 fig- 
ures out today and and CPI 
figures on Friday are expected 
to show inflation staying low. 
Retail sales, excluding 
vehicles, are expected to show 

May 12 

US 

Ditto, ex-autos 

05% 

0.4% 

. Germany 

. Mar ret* sales. West- 

0396 

■ 00% 


US 

April producer prices index 

0296 

.05% 

Germany ' 

Mar rated sabs’* 

08% 

1% . 


US 

Ditto, eacd food and energy 

0.2% 

02% 

. Germany - 

April wbotesate price Index* 

0196 

■0196 . 


US 

Initial claims, w/e May 7 

- 

350.000 

- Fkance 

Mar M3, seasfedj 

0.1% 

-03% 


US 

Mi. w/a May 2 

$3.5bn 

-SI ^bn 

Haly " 

May - bade balance, met EC 

. - 

L2JJ7IV 


US 

M2, wfo May 2 

$8bn 

• -S03bn 

. Spate' 

April unemployment rate 

■r .• • 

172% . 


US 

M3, w/e May 2 

$4.5bn 

-S12Sbn 

■ Swtatt- 

April trade balance 

' . 

■smaira 


US 

Stale benefits, w/e Aprs 30 

- 

■ 2.67m 

fotortfoonmantO'Trtartxiywr Stetfadcs. courtesyMWS inttantsthnai. 


ACROSS 

1 Number of round holeS7 (8) 

5 Verify if back in rebuilt farm 
(«) 

9 Can shut a faulty plant (8) 

10 Wrap end of divan being lifted 
t6) 

11 Very Quick round of coffee 18) 

12 King and Queen taking man's 
foreign cotes (S) 

14 Handle on cleaner brushes 
against mattress cover ( 10 ) 

15 Urged to stop consuming 
spirit ( 1 G) 

22 In which Irene generally has 
to go back 

23 After party he leaves here 
with workman (fi) 

24 Bores doctor with mild dis- 
eases (6) 

25 Tell tales about Lofty prevari- 
cating (8) 

25 Result or having a lousy 
hand? 16 ) 

27 Backed into empty road, 
always taking directions (8) 


DOWN 

1 Crossword compiler slipped in 
the back way for paint (6) 

2 Understands the informer 
accepts little money (6) 

3 Tie the better half around (6) 

4 Are in trouble about search 
being mounted (10) 

6 Artistic movement Rufus and 
Tim developed (8) 

7 Sick and in love is somewhere 
in America (8) 

8 Mae dr ank liquidised narcotic 
plant (8) 

13 Warning shout to man on 
board part of vessel (10) 

15 Where he takes newlyweds? 
(81 

16 Sweep the row that’s shorter 
( 8 ) 

17 Throw on top of a blue build- 
ing (8) 

19 Dog chewed up lilo in church 
( 6 ) 

20 Is bran more suitable for 
clever people? (6) 

£1 Extremely cold fellow and 
very strict (6) 



MONDAY PRIZE CROSSWORD 

No.8,448 Set by GRIFFIN 

A prize of a Pellkan New Classic 390 fountain pen far the first correct 
Bdlution opened and five runner-up prizes of £35 Pellkan vouchers will be 
awarded. Solutions by Thursday May 19, m Monday Crossword 8.448 
on the envelope, to the Financial 'rimes, l Southwark Bridge, London SE1 
9HL. Solution on Monday May 23- 

Name. — — - - - 

Address — — - ; 


Winners 8,437 

K. Aiken, Kendal, Cumbria 
I.H. Hardman, Kfrkby Lons- 
dale. Cumbria 

A. Mabbott, HankwelL Essex 
S.A. Phillips, Blacknest, Hamp- 
shire 

D. Scott, Perth. TaysWe 
P.J.R. Wright, Wistaston, 
Cheshire 


Solution 8,437 




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